Crypto Markets Analysis: A Wave of Economic Data Rises on Wednesday With Fed Rate Decision
Bitcoin rose above $23.7K in the immediate aftermath of the Federal Reserve’s moderate increase, but at least one trend points to a possible crypto price decline.
Bitcoin climbed in the two hours after the U.S. central bank’s Federal Open Market Committee (FOMC) did as has been widely expected and raised interest rates 25 basis points.
Federal Reserve Chair Jerome Powell suggested in comments accompanying the announcement the bankers had been encouraged by price decreases but remained committed to achieving their goal of reducing annual inflation to 2%. The dovish tilt underscored the success of the Fed’s more aggressive rate increases over the past eight months.
Bitcoin was recently hovering above $23,700, up more than a percentage point over the past 24 hours. Ether saw a similar jump in Wednesday trading. Both have been trading relatively flat in recent days.
But crypto investors had a lot of other data to consider on Wednesday. The U.S. Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed job openings increasing to their highest level in five months. The Institute for Supply Management's (ISM) purchasing managers index (PMI) for January declined from the prior month, although the January index slightly exceeded expectations.
Both data points indicate a robust U.S. labor market. Persistently strong jobs data has flabbergasted the Federal Reserve, suggesting that the economy was not slowing enough to cool inflation.
Investors will have more information to ponder over the next two days, including initial jobless claims and multiple earnings reports on Thursday, notably Amazon (AMZN) and Alphabet (GOOGL), along with unemployment data on Friday.
After surging for more than three weeks, crypto markets have been calm, trading in a tight range. The "good economic news (strong growth in productivity and a hot job market) = bad news for crypto and other riskier asset prices" throughout late 2022 has morphed into more of a "good news = minimal price action" mantra.
BTC’s price range has narrowed over the last 10 trading days, holding onto its nearly 40% move higher earlier in January. While bitcoin’s price has increased more than 3% over the past eight days, its Relative Strength Index (RSI) has decreased 15% over the same time period. This trend is often referred to as a bearish divergence and can be a precursor to price declines.
ETH's price has declined in conjunction with a falling RSI. Prices moving in conjunction with a technical indicator often help affirm a price move. ETH’s recent price decline has occurred while its supply has decreased, which counters conventional thinking about supply and demand.
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