Key Bitcoin Points
- Bitcoin prices shot higher in short-covering following the Federal Reserve’s dovish update.
- Weaker US dollar, undecided bond yields add to the cryptocurrency’s upside.
- It tends to retest $57,500 as support to confirm its bullish continuation move towards or above $60,000.
Bitcoin prices dipped ahead of the European market hours on Thursday as traders decided to secure intraday profits after the Federal Reserve-led rally in the previous session.
The flagship cryptocurrency jumped to $59,576 during the Asia-Pacific trading hours, up 11.94 percent from its week-to-date low of $53,221. Traders were uncertain about Bitcoin’s short-term bias during most of the Wednesday session but raised their bids for the BTC/USD pair after the Fed’s monetary policy update.
The Federal Open Market Committee concluded its two-day meeting, stating that it would keep its short-term interest rates near zero—at least—until 2024. Its dovish update dragged the US dollar index lower by 0.46 percent. Meanwhile, the move helped commodities even as some of the policymakers felt uncomfortable with the current dot-plot.
“While we welcome these positive developments, no one should be complacent,” Jay Powell, the Fed chair, said during a post-meeting press conference. “At the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
The Fed wants to run its easy-money approach, which includes $120 billion worth of government debts and mortgage-backed securities purchasing every month, to run until it achieves maximum employment and a sustained inflation rate above 2 percent.
Bitcoin so far has benefited from the expansionary policy, emerging as an alternative asset as investors hunt for better returns in riskier markets. The cryptocurrency reached $61,788, its highest level to date, in March, extending its rally to a little over 1,500 percent if measured from its mid-March nadir last March.
The core personal consumption expenditure inflation, the Fed’s preferred gauge, expects to reach 2.2 percent compared to 1.8 percent predicted in December. Meanwhile, the unemployment rate could fall to 4.5 percent by the end of 2021 instead of 5 percent. But the Fed believes the bump in inflation to be short-lived.
Therefore, it wants to maintain rates lower for a longer timeframe.
Bitcoin Eyes All-Time High
The bitcoin-to-dollar exchange rate now sits above the resistance line of its previous ascending triangle range, looking to test it as support to confirm its short-term market bias.
Earlier, the pair closed above the Triangle range but failed to turn its upside move into a full-fledged breakout action. As a result, it quickly pared a portion of its gains after forming a record high, falling back into the Triangle structure. Bitcoin now eyes to hold the pattern’s upper trendline as support as it eyes a close above $60,000 in the coming sessions.
Fundamentals remain supportive. The FOMC update provides Bitcoin ample support to continue its rally. Meanwhile, Morgan Stanley’s latest revelation of adding three bitcoin-enabled funds to its investment platform can attract more institutional clients to the cryptocurrency sector.
Nonetheless, a break below the Triangle’s upper trendline could BTC/USD towards its 20-4H and 50-4H moving averages. A further correction could have traders eye the lower trendline for additional support. It is currently around the $55,000-level.
A breakout above $60,000 could pave the way towards a new all-time high.