September 24, 2022

Bitcoin (BTC) retreated and reversed its intraday gains after the Federal Reserve announced its third consecutive interest rate hike of 75 basis points (bps) on September 21.

Traders sold the news

BTC price is down about 6.5% from its intraday high of $19,950, hitting $18,660 minutes after the Federal Open Market Committee statement. Its drop mirrored a similar sudden correction in the US stock market, with the benchmark S&P 500 down 0.5% minutes after the Fed’s update.

BTC/USD daily price chart. Source: TradingView

On the other hand, the 10-year US Treasury note yield rose to 3.6% after the Fed’s announcement from 3.56% five minutes earlier. Similarly, the yield on two-year Treasury bills rose from 3.98% to 4% over the same time frame.

The U.S. dollar index (DXY), which measures the dollar’s strength against a basket of major foreign currencies, rose to 111.57 for the first time in 20 years.

The Fed also released an updated “dot chart,” which was in line with its officials’ individual projections for interest rates through the end of 2025. These forecasts signaled additional rate hikes ahead, with a 2022 target of 4.4%. and for 2023, 4.6%.

Central bank officials also predicted that the benchmark rate would peak at 4.6% in 2023. After that, it will drop to 3.9% in 2024, followed by another drop to 2.9% in 2025.

All indicators point to more pain for Bitcoin

The rise in the dollar and the fall in Bitcoin after the Fed update reflect growing appetite for cash and cash-based instruments compared to riskier assets. Meanwhile, the central bank’s dot suggests that investor sentiment will remain unchanged until the end of 2023.

Related: Bitcoin ‘Nuclear’ Warning As Fed Rate Hike Decision Looms – Dollar Index Hits 20-Year High

The price of Bitcoin could continue to suffer due to the Fed’s hawkish stance and its attempts to lower inflation from the current level of 8.3%. Following the central bank’s update, many analysts noticed that the price of BTC could break below the current technical support range of $18,000-$20,000, given that the Fed could raise rates by another 75 bps before the end of the year.

Bitcoin’s technical outlook looked similarly bearish. Notably, the cryptocurrency is forming a bearish reversal pattern called “Head and Shoulders“, whose profit target is around $14,000, as illustrated below.

BTC/USD daily price chart. Source: TradingView

Conversely, a bounce from the $18,800 head and shoulders support level could have around $22,500 as a temporary upside target.