Here’s Why Bitcoin Price Returned All Its Intraday Gains

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On Dec. 14, the price of Bitcoin (BTC) hit a one-month high and saw a brief resurgence in bullish momentum, but the hawkish report from the Federal Open Market Committee (FOMC) of the Federal Reserve and comments from Fed Chairman Jerome Powell sent BTC into an intraday session. low at $17,659.

Stocks and Bitcoin started the day slightly higher but quickly pulled back on the FOMC report. To date, the price of Bitcoin remains closely correlated to equities and a majority of investors are worried about the impact of further rate hikes in the future.

BTC Correlation with Dow Jones and S&P 500. TradingViewRising Interest Rates and Powell’s Warmongering Impact BTC Price

While the Consumer Price Index (CPI) report showed inflation falling to 7.1%, Powell still wants to hit headline inflation of 2%. Inflation has been a driving factor in the rise in interest rates and the current 0.5% hike has been a consensus among FOMC participants. Fed members also agree that rate hikes should continue into 2023.

FOMC survey of future interest rate hikes. Source: Federal Reserve

At the December 14 press conference, Powell said:

We could see higher rates for a longer period to hit the 2% inflation target

This hawkish tone, combined with the FOMC survey, shows that interest rates will continue to rise for the foreseeable future.

What will Bitcoin do next?

Bitcoin’s short-lived rally ahead of Powell’s speech correlated with price action seen across other risky assets. After the FOMC and Powells speech, these assets continued to retrace and some analysts view the recent drop as a move to buy more Bitcoin.

Correlation of risky assets. Source: Digital Delphi

Late buying in the current rally could also be at risk of liquidation if the price of BTC continues to retrace. According to derivatives data, Bitcoin open interest shows that 60.16% of traders are long.

Bitcoin long to short ratio. Source: Coinglass

Currently, the market is digesting the opinions expressed by the FOMC and Powell, so a spike in short-term volatility is not abnormal. Investors should keep an eye on the upcoming daily closes to see if the Bitcoin macro trend has changed.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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