Will Bitcoin bulls push BTC price higher ahead of FOMC minutes release?

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Bitcoin and Ethereum prices have held steady over the past week as bulls wait for the silver lining with the release of the FOMC meeting minutes. The U.S. Federal Reserve is expected to reveal why high inflation persists as the economy enters 2023. Bitcoin price appears anchored, but it’s unclear when the asset will bottom out in the current cycle.

Bitcoin and Ethereum are highly correlated with a coefficient of 0.89, but BTC and ETH prices remained largely unchanged over the past week ahead of the FOMC minutes release. Minutes of meetings of the United States’ Federal Open Market Committee are under the spotlight today as experts seek an explanation for why high inflation may persist in the economy.

Concluding its December 13-14 meeting, FOMC policymakers released new projections for expected inflation in 2023, which were higher than previously thought. This has translated into broader support from pundits for an interest rate hike of more than 5% in 2023, which could drive the value of the US dollar higher.

The US Dollar Index is struggling to hold its own and if it drops after the minutes, that would be positive for cryptocurrencies. The event could therefore prove to be the first bright spot of the year for risky assets like Bitcoin, which benefit from an inverse correlation with DXY.

Will Bitcoin price break resistance at $16,900 as bulls anticipate FOMC minutes release?

The price of BTC remained largely unchanged over the past week. The US Federal Reserve has raised interest rates seven times in a row and the consensus among analysts is that this will be repeated at the end of January 2023.

Most economists are expecting a 25 basis point hike to stabilize the US Fed’s trend. At the last meeting, US Fed Chairman Jerome Powell admitted that interest rates will continue to rise, however, the central bank’s hawkish tone has not had a significant impact on prices. cryptocurrencies.

Bloomberg analysts say the Fed should provide an explanation of why it expects high inflation to persist as the U.S. economy enters 2023, in its minutes today. Fed officials revised their inflation forecasts for the end of 2023 and released them after their December 13-14 meeting. Experts therefore support the estimate that interest rates should rise by more than 5% in 2023.

The largest cryptocurrency by market cap has bounced off a possible entry zone at $16,615 and bulls are now targeting the $16,904 level.

BTC/USDT Price Chart

The Fed will release the FOMC meeting minutes on Wednesday at 2:00 p.m. ET (7:00 p.m. GMT).

Ethereum and Bitcoin remain closely correlated

Based on data from cryptowatch, the correlation between Bitcoin and Ethereum is close at 0.89. The two major cryptocurrencies are in sync, so the altcoin should mirror the movements of BTC.

Digital assets, including Bitcoin and Ethereum, are not out of the woods, however, according to senior market analysts from exchange co-operation OANDA. Edward Maya, Principal Analyst was quoted as saying:

It is still a tough time for crypto as everyone is waiting to see what the next crypto business will fail. The regulations take their time, but the guidelines should start to take hold this year. A leading US regulator issued a joint warning on crypto activities, which contained no new risks. Bitcoin seems anchored but it is still unclear when we will test and possibly create a new bottom.

The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a statement,

It is important that risks in the crypto-asset industry that cannot be mitigated or controlled do not migrate to the banking system. Agencies will continue to closely monitor crypto-asset related exposures of banking organizations.

As agencies monitor the spread of the FTX contagion and stress the importance of crypto regulation, it remains to be seen whether interest and trading volume for Bitcoin and Ethereum stabilizes or declines.

Why the FOMC minutes could have a big impact

Sources familiar with the matter say the minutes of the December meeting may have a greater impact due to the silence of committee members since the holidays. Traders preparing for the year ahead will treat the minutes as the first explanation for the year of the US Fed’s stance on inflation trends.

The U.S. Fed Chairman was not the only hawkish member at the last meeting when expectations for the median rate rose from 4.5% to 5.0%, meaning the consensus among members is more hawkish than he was at the end of the third quarter.

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