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(Kitco News) - Crypto prices climbed higher on Wednesday following a bout of volatility brought on by the interest rate hike from the Federal Reserve, which raised the benchmark rate 25 bps to a range of 5.25% to 5.50%, the highest level in 22 years.
Stocks were under pressure from the market open but saw a brief surge in prices as Fed Chair Jerome Powell announced the hike, only to see those gains vanish as Powell told reporters that the central bank had not yet determined if another hike would follow at their next meeting in September.
Data provided by TradingView shows that Bitcoin’s (BTC) price whipsawed as the Fed made its announcement, spiking to a high of $29,615 before falling to a low of $29,308. Bulls have since rallied the troops to push BTC higher, with the top crypto hitting a daily high of $29,795 in the late afternoon and looking to extend those gains at the time of writing.
BTC/USD Chart by TradingView
The price action in the futures market signaled a quiet day for cryptos ahead of the FOMC meeting as August Bitcoin futures prices were “near steady in early U.S. trading Wednesday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“Prices hit a four-week low on Monday and are in a fledgling downtrend on the daily bar chart,” Wyckoff said. “Bears have a bit of downside momentum to suggest sideways-lower trading in the near term.”
In Wednesday’s “FOMC day” edition of the Trade Letter from MN Trading, analyst Luuk Koolen said that many traders “are looking at a retracement towards the daily [fair value gap] level, which is located between $27,000 and $28,200.”
BTC/USD 1-day chart. Source: MN Trading
“For them, this is the ideal level to buy the dips and anticipate further upward movement,” he said. “However, I believe we will only reach this price level if the outcomes of the FOMC event are negative for risk-on assets.”
With Bitcoin now climbing higher following the FOMC announcement, Koolen’s bullish scenario looks as though it is playing out.
“What we are witnessing is a breakout of the accumulation range, placing us at the price level of $29.2k,” he said. “Additionally, we have observed a significant increase in Open Interest. This indicates that many traders have been eagerly waiting for BTC to choose a direction and have positioned themselves accordingly.”
BTC/USD 4-hour chart. Source: MN Trading
Koolen suggested this development “could potentially mean that a substantial number of short positions have been opened, which increases the likelihood of a short squeeze once we start moving up.”
“If this indeed is the manipulation phase, there is a high possibility that we will enter the distribution phase shortly, and the FOMC event may accelerate this process,” he said. “Another reason why I see the likelihood of this pattern playing out is because it has occurred before, not too long ago.”
BTC/USD 4-hour chart. Source: MN Trading
“In the months of May and June, we saw the three phases unfold in the exact same manner, which reinforces my bias,” Koolen said. “However, the FOMC event will play a significant role in determining how this pattern will further develop.”
After the press conference with Powell concluded, MN Trading co-founder Michaël van de Poppe warned that “a terrible GDP tomorrow” could lead to a sweep of the lows for Bitcoin “before we continue the party up.”
It’s “Buy the dip season,” he said.
Altcoins react positively
Altcoins trended into the green following the conclusion of the FOMC meeting, with roughly 85% of the tokens in the top 200 seeing their prices climb higher.
Daily cryptocurrency market performance. Source: Coin360
Bitgert (BRISE) was the top gainer with an increase of 28.1%, followed by a 15.2% increase for Compound (COMP) and 9.5% gains for Solana (SOL) and Convex Finance (CVX).
The overall cryptocurrency market cap now stands at $1.19 trillion, and Bitcoin’s dominance rate is 48.3%.
