Bitcoin (BTC) retreated and reversed intraday gains after the Federal Reserve announced its third consecutive interest rate hike by 75 basis points (bps) on Sept. 21.
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The price of BTC is down about 6.5% from an intraday high of $19,950, beat 18,660 minutes after the FOMC statement. Its decline mirrored a similar abrupt correction in U.S. stocks, with the benchmark S&P 500 down 0.5% minutes after the Fed’s update.
On the other hand, the 10-year Treasury yield surged to 3.6% following the Fed’s announcement, compared to 3.56% 5 minutes ago. Likewise, the yield on the 2-year Treasury note climbed from 3.98% to 4% over the same time frame.
The U.S. dollar index (DXY), which measures the greenback’s strength against a basket of major foreign currencies, surged to 111.57 for the first time in 20 years.
The Fed also released an updated “dot plot” that matches its officials’ personal interest rate forecasts through the end of 2025. These forecasts point to further rate hikes ahead, with a target of 4.4% in 2022 and 4.6% in 2023.
Central bank officials also forecast that the policy rate will peak at 4.6% in 2023. After that, it will drop to 3.9% in 2024, and then again to 2.9% in 2025.
All indicators point to more pain for Bitcoin
U.S. dollar’s rise and bitcoin’s fall after Fed update reflect investor sentiment There is a growing demand for cash and cash-based instruments compared to riskier assets. Meanwhile, the central bank’s dot plot suggests investor sentiment will remain unchanged until the end of 2023.
Related: Bitcoin ‘nuclear bomb’ warning as Fed rate hike decision looms – dollar hits 20-year high
Bitcoin prices are likely to continue to suffer due to the Fed’s hawkish stance and attempts to bring inflation down from its current level of 8.3%.After the central bank update, multiple analysts famous With the Federal Reserve likely to raise interest rates by 75 basis points before the end of the year, the price of BTC could break below its current technical support range of $18,000 to $20,000.
— CRG (@MacroCRG) September 20, 2022
The technical outlook for Bitcoin is similarly bearish.Notably, the cryptocurrency has been forming a bearish reversal pattern known as a “head and shoulders”with a profit target of around $14,000, as shown in the chart below.
Conversely, if it bounces off the head-and-shoulders support at $18,800, Bitcoin could target $22,500 as its medium-term upside target.
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