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Crypto volatility spikes ahead of FOMC meeting as Bitcoin trades near $26,800
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(Kitco News) - Volatility is on the rise in the crypto market as Bitcoin (BTC) spiked more than $1000 in intraday trading on Monday ahead of the start of the September Federal Open Market Committee (FOMC) meeting, where the Fed will reveal its plan on interest rates moving forward.
Stocks trended higher in the early hours, but the momentum faded in the afternoon as traders moved to reduce their exposure to the market ahead of Wednesday's interest rate announcement. While it’s widely expected that the Fed will leave rates unchanged, there are concerns that a recent uptick in inflation could prompt the central bank to raise rates in an effort to stymie additional increases.
At the closing bell, the S&P recorded a slight gain of 0.07% while the Dow and Nasdaq finished flat.
Data provided by TradingView shows that Bitcoin (BTC) rallied from a low of $26,385 in the early hours on Monday to hit a daily high of $27,425 near midday before reversing course and falling back to support at $26,800.
BTC/USD Chart by TradingView
“September Bitcoin futures prices [were] solidly higher and hit a three-week high in early U.S. trading Monday,” according to Kitco senior technical analyst Jim Wyckoff, who said, “Prices have seen a good rebound from the recent six-month low.”
Bitcoin futures 1-day chart. Source: Kitco
“A price downtrend on the daily bar chart has stalled out,” Wyckoff said. “More good gains in the near term would negate the downtrend and also suggest a near-term market bottom is in place.”
In the latest issue of The Trade Letter from MN Trading, analyst Daan Foppen said, “Investors are currently assigning a 93% probability that the Federal Reserve will maintain its current interest rates in September, with only a 7% chance of a quarter-point rate increase, as reported by CME Group.”
“The FOMC's release of its meeting minutes on August 16 conveyed a clear message that the Fed's course of action will be contingent on incoming data,” he said. “In the release, the Fed explicitly acknowledged that inflation persists at ‘unacceptably high’ levels and highlighted ‘significant upside risks to inflation, which could necessitate further tightening.’”
Foppen said he is “getting cautiously bullish in the short term” as he thinks BTC bulls can “test higher prices,” and highlighted the “current dealing range on the daily [chart],” which shows Bitcoin is still “trading at a discount.”
BTC/USD 1-day chart. Source: MN Trading
“Price tends to move from discount towards premium and vice versa,” he said. “We are in discount and I have some reasons to believe that we will trade higher relatively soon.”
He noted that during Bitcoin's recent move lower, it “took out liquidity on the downside and we broke structure afterward.”
BTC/USD 1-day chart. Source: MN Trading
“What we can see is that we do not have any leftover gaps,” he said. “All that price did is [create] balanced price ranges which is good for a sustainable move towards the upside.”
BTC/USD 1-day chart. Source: MN Trading
“I do think that we will see a run towards the high around $28.1K to take out BSL above that high,” Foppen said. “I even believe that we will see a test of the previous range low around $28.9K. These areas are good regions for profit taking and we need to adapt our plan accordingly when these levels are reached.”
Traders exit the altcoin market
Altcoins trended positive as all but eight tokens in the top 200 recorded gains on the day while the losses were minimal.
Daily cryptocurrency market performance. Source: Coin360
eCash (XEC) led the gainers with an increase of 12.2%, followed by a gain of 11.6% for Merit Circle (MC) and an increase of 10% for Worldcoin (WLD). STP (STPT) led the losers with a loss of 7.65%, while aelf (ELF) declined by 4.62%, and Everscale (EVER) fell by 4.35%.
The overall cryptocurrency market cap now stands at $1.06 trillion, and Bitcoin’s dominance rate is 49%.
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