Crypto markets plummet after Powell’s speech

Bitcoin price surged in early trading on Wednesday, rising above the $43,500 level but plummeted to $42,300 after Fed chair Powell’s meeting. If BTC price declines, further support can be found at $39,000, while resistance may be encountered near $44,000. 

Ethereum pared Tuesday’s gains, dropping to the $2,260 level.  If Ethereum's price declines, it may encounter support near $2,170, while if it increases, resistance may be encountered near $2,400.

The Fed kept interest rates unchanged on Wednesday, within a target range of 5.25% to 5.50%, which was in line with expectations. The Fed, however, has removed the tightening bias from its policy statement, indicating that the central bank is preparing to pivot to a less restrictive monetary policy. The release of the FOMC statement increased risk appetite, boosting cryptocurrency prices briefly. 

Fed Chair Jerome Powell’s press conference after the meeting attracted a lot of attention as traders focused on the central bank’s forward guidance. Powell’s speech caused market volatility as the Fed Chair stated that there would be no rate cuts in March, dashing some investors’ hopes. High interest rates are putting pressure on risk assets and cryptocurrencies plummeted after Powell’s speech.

The approval of Bitcoin spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) caused cryptocurrency prices to surge over the past few weeks. The SEC finally approved 11 applications but the enthusiasm over the approvals of Bitcoin spot ETFs is fading. Expectations of approval of Ethereum spot ETFs boosted Ethereum price on Tuesday. The SEC is not expected to decide on the fate of Ethereum spot ETFs before May, but a report by Standard Chartered Bank on Tuesday raised expectations of approval in the future.

The International Monetary Fund upgraded its global economic growth outlook on Tuesday, providing support for risk assets. The IMF raised its global growth forecast for 2024 to 3.1%, from 2.9% in October. The organization based its updated estimate mainly on increased economic growth in the US and China and on cooling inflationary pressures.

Markets are under pressure by increased risk-aversion sentiment caused by rising geopolitical tensions. Concerns that the Geopolitical crisis in the Gaza area may spread to neighboring countries drive risk sentiment down putting pressure on risk assets. The US and the UK have launched a coordinated action against Houthi rebels in Yemen. A drone attack on US forces in Jordan over the weekend intensified concerns that the crisis might spread to the Middle East.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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