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(Kitco News) - There was a pullback in activity across the cryptocurrency market on Wednesday as crypto traders took stock of the hawkish tone coming from the Federal Reserve regarding interest rates and what it means for the short-term health of digital assets.
U.S. equities finished the day mixed after the latest job print showed that the labor market remains tight amid stubbornly high inflation. Comments from Fed Chair Jerome Powell that “no decision” has been made on the size of the upcoming interest-rate increase didn’t help matters as it only served to leave investors in a state of uncertainty. At the close of markets in the U.S., the S&P and Nasdaq were in the green, up 0.14% and 0.40%, respectively, while the Dow finished in the red, down 0.18%.
Data provided by TradingView shows that Bitcoin (BTC) bears managed to breach below the $22,000 support level in the early trading hours on Wednesday before bullish reinforcements arrived to bid it to a daily high of $22,270 near midday. BTC price has since retraced back to support near $22,000.
BTC/USD 4-hour chart. Source: TradingView
The staunch defense of the $20k support by bulls was highlighted in the morning BTC update from Kitco senior technical analyst Jim Wyckoff, who noted that “March Bitcoin futures prices [were] near steady in early U.S. trading Wednesday and the bulls work to keep price action at least sideways.”
As it stands now, “Bulls and bears are on a level overall near-term technical playing field but a fledgling price downtrend is in place on the daily bar chart and bears still have some momentum,” Wyckoff said.
According to analysts at Eight Global, the main takeaway from the recent comments from Powell is that the Fed is struggling to get inflation under control, which means the current policy is not paying off.
“For this reason, the Fed will have to intervene harder in the near future, and so more and heavier interest rate hikes will be deployed,” they wrote. “So, based on macro factors, we might say that the probability of a weak market in the coming months is higher than the probability that we are going to have a strong market.”
Focusing on the BTC chart, Eight Global said “the range high was too strong and was a great place to secure profits. However, BTC is still in an uptrend structure, with the price currently in an interesting zone to make a higher low.”
BTC/USD 1-day chart. Source: Eight Global
“The price namely trades in a demand zone where a bounce would make sense,” the analysts said. “Dropping below this demand zone (~$21.4) would worsen BTC's outlook, and will possibly mean moving back towards the range low. Other than that, there is really little to say about BTC's current price action. The entire market is currently awaiting a decision from BTC, and so it will remain pretty dull until then.”
Altcoins start to stabilize
The altcoin market showed some signs of stabilization, but the vast majority of tokens in the top 200 recorded at least a slight loss in trading on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
Notable exceptions include Voyager Token (VGX), which gained 42.47% to hit a high of $0.56, and Bone ShibaSwap (BONE), which increased 17.8% after it was revealed that the public beta for Shiba Inu’s (SHIB) layer-two scaling solution Shibarium will be launching later this week.
The overall cryptocurrency market cap now stands at $1.01 trillion, and Bitcoin’s dominance rate is 42.2%.
