Bitcoin staged a recovery above $42,000 as the Federal Reserve (Fed) maintained stable interest rates. This marks the third consecutive meeting in which the Fed prioritized stability by keeping interest rates unchanged. The rates remain at their highest level in 22 years, fluctuating between 5.25% and 5.5%. This move reflects the Fed’s dual mandate efforts to control inflation while minimizing economic disruptions.
After dipping to $40,000, Bitcoin experienced a noteworthy surge, reaching a new daily high of $42,700. The increase in Bitcoin’s value is directly linked to the Fed’s interest rate stance. Lower interest rates typically make government securities less attractive, increasing the appeal of assets like cryptocurrencies.
The current approach of the Fed has shifted expectations for future monetary policy. Futures contracts for interest rates now indicate a more than 60% probability of rate cuts in March 2024. This likelihood has significantly increased, with expectations of rate cuts in May soaring to 90%.
From a technical analysis standpoint, the $38,000 region could play a crucial role as the main support in the coming days, alleviating concerns for long-term investors.
The breakout past the triangle pattern
In November, Bitcoin encountered strong resistance at the $38,000 mark, leading to the formation of an ascending triangle pattern with a trendline support in green rendered ineffective.
Breaking through the $38,000 mark, followed by a recovery to $44,700 on December 8, occurred just a week later. Since then, Bitcoin has faced strong profit-taking pressure. The weekly chart of Bitcoin highlights the significance of the $41,000-$43,000 range, previously acting as resistance in Q1 2022.
In the past week, Bitcoin surpassed this resistance level and briefly tested it as support before falling below this range. In doing so, it left reasonable price gaps that could act as resistance in the next retest. Currently, the market structure of BTC is trending upward on the daily chart and will likely continue until the $36,700 mark is breached.
Critical Round Number Levels Pose Significance for Traders and Investors
Psychological support and resistance levels at round numbers are not a new phenomenon, and this holds true for BTC. Hyblock’s data analysis emphasized the importance of the $35,000, $40,000, and $45,000 levels. The $39,600-$40,000 range has a substantial estimated liquidation volume, even more so in the $44,900-$45,700 range.
Below $40,000, there are crucial levels. Liquidation levels just above $35,000 are likely to attract BTC if the cryptocurrency drops below the $39,000 region.
Even after a seemingly harsh price correction, Bitcoin is expected to maintain its upward market structure on higher timeframes. This is because the $35,300 mark remains a significant support level established just one month prior.
