What is the biggest Fed rate increase in 40 years? Five things you need to know about Bitcoin this week

September 19, 2022

After the low weekly close in July, Bitcoin ( ) will face another week of “huge” macro announcements.

BTC/USD has not recovered after suffering losses for days due to the recent inflation data from the United States.

The largest cryptocurrency has yet not to turn $20,000 to convince support. As the third week of September begins, there is a danger that this level could be used as resistance.

Bulls have plenty of worry: The Federal Reserve will decide on its next key rate increase in the coming days, which will impact the market beyond just sentiment.

Additionally, the aftermath of Ethereum Merge continues, with Mt. The Bitcoin price landscape is further clouded by reimbursements to creditors at Gox.

Cointelegraph looks at five market-moving factors that could affect Bitcoin’s future.

Fed rate hike “sledgehammer” in focus

The Federal Reserve’s decision regarding key interest rates is the main event of the week.

The Fed will be under increasing pressure to act after the August Consumer Price Index (CPI), print came back “hotter” that expected.

According to to CME FedWatch Tool, September 19, the market has priced in a minimum 75-basis point Fed funds rate hike. However, it is not discounting the possibility of 100 basis points.

The Fed would take a 100-point increase, which is the first such action since 1980.


Chart showing Fed target rate probabilities as of September 19, 2022. Source: CME Group

Federal Open Market Committee (FOMC), which will meet September 20-21, will issue a statement confirmating the Fed’s support for the figure and confirming the hike.

“The Fed won’t be easing anytime soon,” Mike McGlone (senior commodity strategist at Bloomberg Intelligence) stated in an interview that he conducted with Kitco.

He said that risk asset growth had “swung too far to one side” since the March 2020 crash and that it is now “very obvious” that a reversal will occur.

McGlone stated that Crypto will be part of the overall market reset and Bitcoin will eventually win, repeating a long-held theory regarding the cryptocurrency’s future. Both gold and pain will outperform.

He summarized, “Unfortunately, the Fed must stop this sledgehammer by tightening for risk assets.”

This week’s 100-basis point move would accelerate that process. It is now being accelerated by catalysts from other central banks outside the U.S., who were initially slow in raising rates to combat inflation.

Games of Trades, a popular Twitter analytics account, stated that it was crunch-time for the S&P 500 before the opening of Wall Street trading.

Analyst and commentator Kevin Svenson said that Crypto market will not do well in times like these, when there is major uncertainty.

After a poor weekly close, spot price falls

Bitcoin price action has fallen in the past week as tailwinds have stacked up for it.

BTC/USD fell more than $2,000 in one weekly candle. It closed below $20,000, which is the lowest close of its kind since July according to data from Cointelegraph Markets Pro, and tradingView.


BTC/USD 1-week candle chart (Bitstamp). Source: TradingView

After the close, there was a sharp downturn that saw the pair drop below $19,000


BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

It is understandable that the bearish mood is there. The Ethereum merger became a “sell-the-news” event, and along with macro triggers contributed to a new risk asset flight.

Analysts are now weighing the likelihood of the downtrend remaining in place until the Fed rate announcement is made.

“BTC has been soaring through the weekend, but there’s still potential for volatility before the close,” Material Indicators shared with Twitter followers in a part of a Sept. 18 post:

“The FED and economic announcements next week will spice things up again.

A chart was attached that showed the current state of play in Binance’s order book. Support at $19,800 has been maintained since the failure to sustain price action.

Material Indicators had concluded that the day before, there was no point in thinking that a deeper fall could be avoided. The order book showed that bidding activity was not sufficient to support current levels.

Consider when a macro bottom might occur. In the meantime, Cheds, a popular trader, bet on Q4 of this year, and described Bitcoin’s progress as “right on track”.

“$BTC weekly beginning to press range lows,” he said in an additional tweet into the weekly close.

At the time of writing, shorts were up on Binance and FTX. This suggests a coordinated effort by derivatives traders to lower the market. This was also argued by another popular account Ninja . However, said that this strategy would not succeed beyond Wall Street.

The U.S. dollar swells below a multi-decade peak

The U.S. dollar is a potential macro high that Keenly Eyes, however, has recovered from the losses suffered post-CPI print.

The U.S. dollar (DXY), a classic headwind for crypto is currently at just below 110 after consolidating for several days.

While the Index reached 110.78 earlier in this month, it was its highest level since 2002, it did not experience significant retracements.

Hyland, who last week analyzed the immediate future, warned that DXY would see a “new blowoff top” and accompany a “capitulation” in risk assets.

The inverse correlation between DXY/USD and BTC/USD confirms that sharp upwards movements of the former have a significant impact on the latter.


U.S. dollar index (DXY) vs. BTC/USD 1-day chart. Source: TradingView

Ethereum feels the post-Merge blues

The hype surrounding the highly-anticipated Merge is over, and Ether ( Ethereum) has seen a significant drop in its popularity.

Last week, the ETH/USD exchange rate fell 25% in an attempt to tilt market share back in Bitcoin’s favour.

The pair is currently trading below $1,300, the lowest level since July 16. Analysts and traders all over the world are making bearish predictions about the pair.


ETH/USD 1-hour candle chart (Binance). Source: TradingView

Svenson stated that Ethereum was failing to maintain critical support. also warned that the weekly close had failed to bring an end to the losses.

Matthew Hyland, an analyst, suggested a target value of $1,000 for Ethereum/USD. He also said that $1,250 “should be enough support”.

BTC was up against Ethereum by 19% during the week. Bitcoin’s share in the global crypto market cap increased 1.2% since Sep.

CryptoGodJohn, a well-known trader, said that everything was still playing for a “generational entrance” opportunity on the pair.

Samson Mow (CEO of Bitcoin adoption startup JAN3) was less enthusiastic. He noted that although ETH/USD was above its 200-week moving mean (WMA) at current levels at the time, Bitcoin was lower than its own equivalent.

The 200 WMA is an important trendline in crypto bear markets. Reclaiming it after losing support has historically been a sign of strength.

The supply of Bitcoins in dormant state continues to age

Despite recent volatility in prices, hodlers remain determined, according to on-chain data.

Similar: A 0.75% Fed Rate hike could be a bullish sign for Bitcoin and altcoins

Glassnode analytics says that coins kept for at least five years show only one trend: Up.

Glassnode updated its data to confirm that the percent of BTC supply that was active at the end of September 2017 or earlier hit a new record of 24.8%.


Bitcoin % supply last active 5+ years ago chart. Source: Glassnode/ Twitter

The supply was last active five to seven years ago. Meanwhile, its highest in nearly two years was 1.01 million BTC.


Bitcoin supply last active 5-7 years ago chart. Source: Glassnode/ Twitter

“Younger” coins are also moving, with the 6-12 month bracket reaching five-month highs.

However, the long-term trend of seasoned investors in Bitcoin is evident by the supply portion held long-term holders (LTHs).

“LTH Supply” is the Bitcoin volume that has been idle for 155 days and is statistically the least likely of being spent during market volatility. Glassnode explained last Wednesday as the metric reached all-time highs at 13.62 million BTC.

Cointelegraph reported that Bitcoin flows to the exchanges experienced their largest single-day total in several month after the CPI event.

These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.

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