The Bitcoin (BTC) price has successfully defended the $28,000 support on May 2, but has yet to prove the strength needed to reclaim the $29,200 level from April 30.
$30K becomes crucial for Bitcoin bulls
Some analysts will pin the recent downtrend to the expectation of an interest rate increase by the U.S. Federal Reserve (Fed) on May 3, but in reality, the market is pricing 92% odds of a modest 25 basis point increase to its highest level since September 2007.
$DXY up/#Bitcoin down on yesterdays PMI data release.
Market is now pricing in a very high probability of 25bps raise at tomorrows #FOMC.
This is likely mostly priced in for BTC, but the comments afterwards (more rates/pause) will likely bring the volatility. https://t.co/H5qtGpd8gA pic.twitter.com/BmdsNRtb1f
— Decentrader (@decentrader) May 2, 2023
As the market intelligence platform Decentrader pointed out, the comments from Fed chairman Jerome Powell are more likely to bring surprise elements, either pointing to further measures to slow down the economy or signaling higher odds of the terminal interest rate being close to 5%. Powell is set to hold a press conference at 2:30 p.m. ET.
From an employment perspective, the central bank has reason to believe that the market continues to overheat. The U.S. government reported 1.6 job openings for every unemployed worker in March. Moreover, according to the ADP National Employment report released on May 3, private payrolls increased by 296,000 jobs in April, well above the 148,000 market consensus.
However, raising interest rates has negative consequences for families and small businesses, in particular. Financing and mortgages become more costly, while investing in fixed income becomes more attractive. Such an undesired effect of curbing inflation could further shake the core of the financial system, as shown by the latest bank failure of First Republic Bank.
Therefore, an eventual Bitcoin price breakthrough above $30,000 could be a definitive sign of investors’ perception shift from a risk-asset to a scarce digital asset that directly benefits from a weaker traditional banking system.
But to gauge whether Bitcoin’s resilience above $28,000 is sustainable, one must analyze if excessive leverage has been used by buyers, and whether professional traders are pricing higher odds of a market downturn using BTC derivatives.
Bitcoin futures show low demand from leverage buyers
Bitcoin quarterly futures are popular among whales and arbitrage desks. However,…
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