Bitcoin has risen back above $27,000 ahead of the FOMC meeting, but a decline in stablecoin supply controlled by major investors could hinder its upward momentum.
Bitcoin bulls are making a strong return after facing resistance at $27,200 earlier this week. All eyes are on whether BTC can establish itself above $27,000, potentially pushing toward $31,000, or if it will dip to seek support around $25,000, and in a worst-case scenario, extend the decline to $22,000 in search of liquidity.
Bitcoin’s Response to the FOMC Meeting
The crypto market is closely monitoring the Federal Open Market Committee (FOMC) meeting, with concerns about its potential impact on Bitcoin and the broader crypto market.
Economists, as reported by Reuters, anticipate the Federal Reserve will pause interest rate hikes for the second time this year but leave the possibility open for future increases by year-end. Currently, the Federal Reserve’s benchmark interest rates range from 5.25% to 5.5%.
Following the first pause in June, past FOMC meeting remarks indicated that the Fed expected two more rate hikes to combat ongoing inflation. The first hike occurred in July, and now, there’s speculation of a potential skip in September before considering the second hike.
Bitcoin has been on a steady uptrend since the release of August’s Consumer Price Index (CPI) data, which showed a slowdown in inflation. However, rising crude oil prices have created mixed signals, with some committee members seeing “significant upside risk to inflation.”
On the weekly chart, Bitcoin has been following a discussed fractal pattern. After facing resistance at $27,200, it briefly dipped below $27,000 but found support at the upper range limit, allowing it to regain the $27,000 support level.
BTC/USD weekly chart | Tradingview
Bitcoin’s market structure is showing signs of improvement, highlighted by the 200-weekly Exponential Moving Average (EMA) at $25,609.
If the bulls can turn the 21-week EMA (red) and the 100-week EMA (blue) into support levels, it could trigger a breakout to $31,000. However, there’s the possibility of a fractal pattern pushing the price below $30,000 in the near future.
Important trend indicators, such as the SuperTrend and the Money Flow Index (MFI), support the bullish sentiment. The SuperTrend assesses market volatility, while the MFI measures the volume of money entering and exiting BTC markets.
As long as the SuperTrend continues to trail Bitcoin’s price while offering support and the MFI sustains the uptrend towards the overbought territory, the odds favor a larger uptrend.
Increasing Institutional Adoption of Bitcoin?
Despite the crypto winter and multiple capitulations, interest from institutional investors remains robust. This interest is fueled by the pursuit of a spot Bitcoin exchange-traded fund (ETF), with participation from major global firms including Blackrock, Fidelity Investments, and Franklin Templeton, among others.
Santiment, a data analytics firm, suggests that Bitcoin’s price surge beyond $27,000 was bolstered by the introduction of an Adoption Fund for institutional investors by Nomura, Japan’s largest bank.
🏦 #Bitcoin received a boost to $27.2K after Japan's largest investment bank, #Nomura, launched an Adoption Fund for institutional investors. This is the latest in #crypto's efforts to increase exposure for interested parties beyond traditional traders. https://t.co/ylDEDG9ehY pic.twitter.com/qDau3TzlEB
— Santiment (@santimentfeed) September 20, 2023
The growing interest of institutions in gaining exposure to Bitcoin is anticipated to yield positive long-term effects on its price. However, in the short term, insights from Santiment suggest that “whales,” or large holders of cryptocurrency, have been reducing their holdings of stablecoins. This development could potentially hinder the upward trend, as their purchasing power is not as formidable as it was when Bitcoin surpassed $30,000 back in June.
Stablecoin supply held by whales | Santiment
Stablecoin holdings among whales with balances exceeding $5 million have reached their lowest point in the past six months. To facilitate a significant upturn in Bitcoin’s price, it’s crucial for these whale addresses to bolster their stablecoin holdings.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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