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Bitcoin Teeters on the Brink of Two-Month Low
On August 17, Bitcoin (BTC) was in a precarious position, flirting with its lowest price point in two months, following the resurgence of US inflation fears that rattled the cryptocurrency markets.
Uncertainty Around Federal Reserve's Monetary Policy
The pullback in BTC value coincided with the release of the US Federal Reserve's July meeting minutes, which disrupted the steady price trajectory BTC has been experiencing since June 21. During the session, BTC/USD experienced a significant slump, dropping to $28,300.
High Inflation - A Catalyst for Interest Rate Hikes
The minutes from the Federal Open Market Committee (FOMC) meeting detailed members' anxiety over consistently higher inflation, should there be no subsequent interest rate increase. This is a prospect that risk asset sectors aren't particularly enthused about for their future.
"Various risk-management factors that might shape future policy decisions were discussed by the participants," the minutes reported.
Reactions to the Fed's Unsettled Stance
Although the Fed also voiced concerns about the impact of current monetary constrictions, the market's reaction to these comments was predominantly negative. This sentiment caused BTC/USD to drop below several recently established support levels, one of them being the 100-day simple moving averages (SMAs) at $28,570, followed by the 21-week SMA at $28,600.
Traders Anticipate BTC's Next Move
Due to the declining BTC prices, many consider the lower limit of the months-long trading range as the next checkpoint. Traders such as Daan Crypto Trades and Crypto Tony have pointed this out earlier. Crypto Tony noted on the day," Bitcoin has now dipped below $28,800, so my strategy is to short while BTC remains under the $28,800 mark." He added that $28,000 is his first goal.
Mixed Views on Possible Rate Increase
Bit even with the anxiety over inflation, not all are persuaded that the FOMC's next meeting in September will result in increased rates.
Following the minutes' release, the FedWatch Tool by CME Group indicated a nearly 90% chance that the current rates will stay the same.
Market Analysts Remain Divided
Caleb Franzen, a senior analyst at Cubic Analytics, contradicted the consensus last week, arguing that disinflation, not inflation, is the persisting issue. Franzen believes that the convergence of disinflation, robust earnings, positive economic data, and an approaching end to the rate hike cycle will be a winning formula for market returns and an emerging uptrend.
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