Bitcoin Price Set to Jump on Hopes FOMC Rate Calendar Leads

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Data analyzed by CryptoSlate suggests that the strong correlation between Bitcoin and gold could mark the start of a price rally, depending on whether the Fed’s hike schedule is carried out by March.

The Federal Open Market Committee (FOMC) meeting is set to end on February 1, with the market overwhelmingly expecting a 25 basis point hike, which will take the federal funds rate to 4.5% – 4.75% .

Source: cmegroup.com

The next FOMC meeting is expected to conclude on March 22, with the majority of analysts betting on another 25 basis point hike. From here, the Fed is expected to hold rates at the top of the hike schedule.

Bitcoin and FOMC meetings

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

When the Fed started raising rates, a negative performance for Bitcoin could be explained by selling pressure resulting from fearful markets. However, over the course of the year, as the market has accepted the inevitability of higher interest rates, a less negative reaction is expected.

Source: CryptoSlate.comSource: CryptoSlate.com

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

Strong BTC-gold correlation

In plotting the performance of the S&P and gold, since 1998, against the fed funds rate, it was noted that the top of the Fed’s hike schedule coincided with a bottom in the price of gold, as shown by the black arrows on the graph.

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

Similarly, the breaks in the interest rate calendar coincided with the bottom of the S&P, shown by the red arrows below, leading to sustained upward moves for tech stocks.

Source: TradingView.com

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

If gold reacts as it has in past instances of the Fed’s hike schedule, and Bitcoin mimics gold, BTC could experience a significant price increase.

Source: TradingView.com

However, there is no certainty that March will mark the peak of the Fed’s rate calendar. In addition, other macroeconomic and geopolitical factors are at play, as is the evolution of the situation at Genesis following its bankruptcy filing.

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