While bitcoin's dips have found buyers, the cryptocurrency is struggling to clear the important psychological hurdle of $11,000 ahead of the U.S. Federal Reserve's rate decision due later Wednesday.
- The cryptocurrency found bids near $10,675 during the early Asian trading hours, but faced rejection near $10,940 around 08:00 UTC, according to CoinDesk's Bitcoin Price Index.
- Bitcoin has failed twice in the past 24 hours to absorb selling pressure just below $11,000.
- At press time, bitcoin is changing hands near $10,850, representing a 0.58% gain on the day.
- The slight pullback this morning has weakened the case for a move above $11,000 put forward by a bull flag breakout confirmed during early European hours.
- On the downside, the higher low of $10,675 created early Wednesday is the level to beat for the bears.
- Price volatility may pick up following the Federal Reserve's rate decision, due at 18:00 UTC.
- The Fed is expected to keep interest rates unchanged and reiterate its willingness to tolerate high inflation.
- In other words, interest rates are likely to remain low for a prolonged period – a bullish development for scarce assets like bitcoin and gold.
- Markets, however, have already factored in this likelihood, according to Reuters.
- The focus, therefore, will be on the Fed's growth and inflation forecasts.
- According to BK Asset Management's Kathy Lien, the U.S. dollar may find buyers if the Fed is more positive on economic growth. In that case, bitcoin will likely face selling pressure.
- Investment banking giant Goldman Sachs has already upgraded the U.S. third quarter gross domestic product forecast to 35% from 30%.
- If the Fed announces more stimulus measures, the dollar would likely drop, potentially powering stronger gains in bitcoin.
- Bitcoin has become more sensitive to action in the U.S. dollar over the past 2.5 months.