March 21, 2023 – The Fed’s interest rate decision tomorrow may determine whether the current Bitcoin’s rally will continue through the end of March. The expectations regarding the interest rate decision have changed dramatically during the month with the international banking crisis dominating the newsflow, putting inflationary concerns aside. Currently, the consensus is a 25 bps hike leading the US interest rate to the 4.75-5.00% level.
However, the way the US central bank will inform its decision may give Bitcoin another leg up. If the Fed communicates that this interest rate level is enough to accommodate inflationary and banking concerns for the time being, that would be a catalyst for risk assets to outperform. If the central bank says that it will continue to seek a higher level of interest rate, that would be neutral to negative to Bitcoin, in our view. Moreover, it seems very unlikely that the Fed will not raise interest rates or decide for a 50 bps hike, in our view.
We believe that Bitcoin will remain hovering around the US$28k until the Fed’s rate decision tomorrow. In the case of a positive macro message, we think the major cryptocurrency could test the US$30k level. There are some indicators such as the Greed & Fear Index, which is at the “Greed” region right now; and record transaction activity at the Bitcoin network, pointing to a more bullish sentiment. On top of that, the stablecoin conversion into BTC is at a four-year high. We think that favorable conditions are forming for the continuation of the current rally coupled with the consolidation of the safe haven narrative for Bitcoin.
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