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Research: Bitcoin price expected to jump on hopes FOMC rate schedule tops out


Research: Bitcoin Price Expected to Bounce in Hope FOMC Rate Chart Hits High Research: Bitcoin Price Expected to Bounce in Hope FOMC Rate Chart Hits High
Research: Bitcoin Price Expected to Bounce in Hope FOMC Rate Chart Hits High

Cover/illustration via Cryptooshala

Data analyzed by Cryptooshala suggests that a strong correlation between Bitcoin and gold could mean the start of a price hike, depending on whether the Fed’s schedule for a March increase is met.

The Federal Open Market Committee (FOMC) meeting is due to close on February 1, and the market is overwhelmingly expecting a 25 basis point hike, pushing the federal funds rate to 4.5% to 4.75%.

Federal target rate on February 1
Source: cmegroup.com

The next FOMC meeting is due to end on March 22, and most analysts are betting on another 25 basis point increase. From there, the Fed is expected to keep rates marking the top of the hike schedule.

Bitcoin and FOMC meetings

Looking at the percentage change in the price of bitcoin at each 2022 FOMC meeting the day before, during and after the event, 13 out of 24 cases resulted in a drawdown for the leading cryptocurrency.

When the Fed first started raising rates, bitcoin’s negative performance could be explained by selling pressure caused by market fears. However, during the year, as the market resigned itself to the inevitability of higher interest rates, a less negative reaction is expected.

Percent change in Bitcoin before, during and after the FOMC
Source: Cryptooshala.com
Combined before, during and after percentage change
Source: Cryptooshala.com

More important than daily price movements is long-term movement relative to the Fed’s rate schedule.

Strong BTC-Gold Correlation

When plotting the performance of the S&P and gold since 1998 against the federal funds rate, it was noted that the top of the Fed increase chart coincided with the bottom of the gold price, as indicated by the black arrows on the chart.

In these cases, the price of gold continued to rise significantly. For example, at the end of 2005, the price went from $400 an ounce to $1,920 an ounce in six and a half years.

Similarly, the pauses in the interest rate chart coincided with the bottom of the S&P, shown by the red arrows below, which led to a steady increase in technology stocks.

Gold and S&P
Source: TradingView.com

Since February 2022, the price of bitcoin and gold has shown an 83% correlation, the highest in a year.

If gold reacts, as it has done in the past when the Fed’s bullish schedule topped out and Bitcoin mimics gold, BTC could expect a significant jump in price.

Bitcoin and the price of gold
Source: TradingView.com

However, there is no certainty that March will be the Fed’s top interest rate. In addition, other macroeconomic and geopolitical factors come into play, as well as the evolving situation at Genesis after filing for bankruptcy.

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Credit : cryptoslate.com

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