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Fed day brings crypto sell-off, but analysts remain bullish

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(Kitco News) - Fed day arrived and led to a negative performance in the crypto market as the central bank held interest rates steady in the range of 5.25%-5.5% but reiterated their projections that rates could close out 2023 in a range of 5.5%-5.75%, implying that there will be one more rate hike this year.

“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” a statement from the Fed said.

Stocks trended into the red following the announcement, with Wall Street analysts now debating how long it will be before the Fed announces a rate cut despite the recent uptick in inflation. At the closing bell, the S&P Dow, and Nasdaq all finished lower, down 0.94%, 0.22%, and 1.53%, respectively.

Data provided by TradingView shows that the Fed’s interest rate announcement initially had little effect on Bitcoin (BTC), but a minor selloff ensued as the afternoon progressed, which dropped the top crypto to a daily low of $26,800 before bulls bid it back near support at $27,000.

BTC/USD Chart by TradingView

Kitco senior technical analyst Jim Wyckoff said “September Bitcoin futures prices [were] weaker in early U.S. trading Wednesday, on a routine corrective pullback after hitting a nearly three-week high Tuesday.”

Bitcoin futures 1-day chart. Source: Kitco

“Bulls are hanging tough,” Wyckoff said. “Prices have seen a good rebound from the recent six-month low. BC prices are starting to trend higher. The bulls still have some upside momentum.”

Analysts at MN Trading noted that, prior to the interest rate announcement, Bitcoin “tested the old range high for the second time and has bounced strongly from it.”

BTC/USD 1-day chart. Source: MN Trading

“With the test of the range high, all liquidity at the bottom has also been removed, increasing the likelihood of continuation to the upside,” they said. Our “expectation is that BTC will push through to $28k from here, where there will be a significant amount of liquidity. If BTC also breaks through $28k, then $29k will be the next strong resistance area.”

That being said, they warned that BTC may face resistance while attempting to push through these areas, “so we may consolidate around these price levels for a while. However, if BTC continues to show strength in the coming weeks/months and overcomes these levels, it looks very promising, and we may be gearing up for new yearly highs.”

Zooming in on the 4-hour BTC chart, the analysts highlighted that the resistance zone (green) has been breached and is now serving as a strong support level.

BTC/USD 4-hour chart. Source: MN Trading

“As long as BTC remains above this green zone, we see no reason why it shouldn't move towards $28k,” they said.

While technical analysts are busy scouring the charts to identify important support and resistance levels to make predictions about the future price of Bitcoin, Rich Dad Poor Dad author Robert Kiyosaki suggested that the real question people should be asking themselves is “How many Bitcoins you have today.”

Mixed day in the altcoin market

The altcoin market traded mixed, with a majority of tokens in the top 200 recording losses on Wednesday.

Daily cryptocurrency market performance. Source: Coin360

Merit Circle (MC) was the biggest gainer with an increase of 22.5% to trade at $0.40, followed by a 15.1% gain for STP (STPT) and an 11.5% increase for Worldcoin (WLD). tomiNet (TOMI) suffered the largest decline with a loss of 11.8%, while THORChain (RUNE) and Toncoin (TON) fell by 6.6%.

The overall cryptocurrency market cap now stands at $1.07 trillion, and Bitcoin’s dominance rate is 49.2%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.