This Wednesday, May 4th, the Federal Reserve of the United States (FED), will proceed with its monthly speech through its president Jerome Powell. This is an event that has been attracting attention and dictating the market for several months now. What should we expect? We decipher it for you
A cryptocurrency market in tension
After the worst April in its history, Bitcoin (BTC) is starting another week that will be pivotal. The queen of cryptocurrencies closed the month in the middle of a channel ranging from $32,000 to $48,000, which has been occupied since the beginning of 2022.
As is often the case when Bitcoin falls below $40,000, anxiety and fear of a return to $30,000 (and lower) grips the market. And the US Federal Reserve’s (FED) decision on Wednesday 4 May on the country’s economic policy will do nothing to alleviate this.
On the contrary, the next few days could see knee-jerk reactions from investors. Financial markets, including cryptocurrencies, are awaiting central bank policy announcements.
What to expect from the FED speech
Inflation is accelerating at a rapid pace around the world. The United States has an 8.5% year-on-year index, France is at 4.5% while Germany is over the 7% mark. As a result, the FED chairman is expected to speak, including an announcement of a rate hike.
Moreover, another announcement is particularly awaited and feared: that of the $1000 billion asset sale programme. The main question is whether the impact of this announcement has already taken place on the financial markets and consequently on crypto-currencies.
In any case, given the sensitivity of the cryptocurrency market at the moment, any shock would be likely to trigger high volatility, at least temporarily. Over the past six months, every FED announcement has preceded and followed strong volatility movements in both directions.
Bitcoin back to $28,000
With a monthly close around $37,500, the last 30 days have been particularly complicated for Bitcoin. Expectations were quite high, with April being a historically bullish month. And yet, the year 2022 gave us the worst April in Bitcoin’s history, with a 17.3% drop.
Monthly performance of the BTC/USD pair
At the moment, analysts agree that Bitcoin is in a lateralization zone initiated in April 2021. This ranges from $29,000 to the former high of $68,000. For the time being, this structure has higher highs and lows than the previous ones.
In other words, as long as the previous low around $33,000 is not broken, this pattern remains valid. However, a monthly close below this level would most likely result in a drop to $28,000 and then eventually to the old support at $18,000.
In this trend-neutral area, the slightest shock could cause the market to fall. In a context of tension exacerbated by the FED’s announcement, many analysts agree that it will be the trigger for this scenario of a return to $28,000.
