The cryptocurrency market maintains its depressed tone of the last few days and has been in a string of sessions in which the digital tokens as a whole have failed to recover from their recent declines. Total capitalization stands at around $1.74 trillion, with the main assets, Bitcoin and Ethereum, near important support levels, while experts indicate that more suffering can be expected if the US Federal Reserve (Fed) shows its hawkish side on Wednesday.
The past four sessions have seen Bitcoin consolidate its short-term negative outlook and confirm that $40,000 is now the most important resistance to overcome. “The digital asset is hovering around important support as investors begin to price in much more aggressive tightening from the Fed,” commented Edward Moya, analyst at Oanda.
Technical analysis suggests that the world’s most traded cryptocurrency is struggling to break above the $38,800 barrier, with declines to near two-month lows in the $37,500 range. If Bitcoin persists in its bearish endeavor below the $39,000 pivot level, it could depreciate significantly. However, there is hope, as a clear move above the 23.6% retracement level of the key decline from the high of approximately $40,350 to the low of $37,400 has been observed.
However, “the cryptocurrency could continue to move lower if market volatility continues into May,” stated Moya. “The $35,000 level should provide important support for Bitcoin, but if the Fed decides to be more aggressive in tightening its policy, the fall could head to the $30,000 region,” the Oanda expert noted.
On Wednesday, the Fed will discuss a rate hike of 75 basis points, but it will most likely decide on a 0.5% increase. The Fed’s decision on the start of balance sheet reduction is just as important, where it could put a $40 billion monthly cap on Treasuries and a $25 billion target on mortgage securities. “It is possible that they will put a higher cap on balance sheet normalization and that could be a hawkish surprise that could trigger the next round of dollar strength.”
The market discounted a strong start to the rate hike cycle, “but the big question is how aggressive they will be with quantitative tightening,” Moya concluded.