As the market awaits the speech by Chairman Jerome Powell, the U.S. Federal Reserve (FED), Bitcoin surges on the final day. Despite recent gains, overall sentiment remains bearish in the crypto market.
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Bitcoin traded at $38,800 as of the writing. There has been a 1.5% profit over the 24-hours.
It is possible that the market will be shocked by the debut cryptocurrency measured in market capital. Some operators have started predicting a massive crash ahead of Powell’s intervention.
The old market adagio “Sell in May and go away” seems more present than ever as the sentiment turns fully fearful. In a recent report, trading firm QCP Capital revealed their chain is biased as the bearish sentiment seems “slightly over-extended”.
In that sense, the firm claims that market participants could have priced in any FED announcement “too aggressively”. If the financial institution appears dovish, or an announcement of an increase in interest rates within expectations, then the crypto market might be ready for some relief. QCP Capital stated:
We could be seeing a short-term squeeze with extreme bearish sentiment. This might be the rally we have been waiting to sell into as the multiple-compressing effect from QT and recessionary pressures from the rate hikes begin playing out (…).
It could be several months before the law goes into effect. BTC may rise above $40,000 during the meantime.
NewsBTC stated that two possible scenarios exist for world markets in 2022. A dovish or aggressive FED. For Bitcoin prices and risk-on assets, the latter will be the most effective.
How Bitcoin could benefit from market anticipation
If the market responds before future announcements, the financial institution might be less flexible in the implementation of its monetary policies. QCP Capital thinks this is already occurring:
(…) price reactions in anticipation of the FED are effectively serving the FED’s goals. Powell said on 21 April that he was pleased that markets have reacted to the FED’s hawkish indications. (…) we have seen some of the largest moves across markets in years.
According to the firm, market participants can expect interest rate increases of up to 75 basis points (bps). This aggressive strategy could prove to be advantageous for Bitcoin, and other crypto markets.
In that sense, QCP Capital claims the market is doing the FED’s job by keeping prices down and reacting to announcements. The firm added: “this gives the FED more breathing room in their fight against inflation”.
QCP Capital thinks inflation is finally at its highest point. The FED may reduce its rhetoric or allow inflation to remain within the expectations range.
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In case of potential downside ahead of Powell’s speech, the firm pointed at BTC’s price 50% retracement from its all-time high around $36,400 and its 61.8% retracement at $28,700.