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Bitcoin underwent a major downward correction just hours after the Federal Open Market Committee (FOMC) released the minutes of its November 5-6 meeting on Wednesday.
The benchmark cryptocurrency dropped nearly $ 1,000 in the late New York trading session, following an incredible price rally that saw it nearly double in value in just seven weeks. Many traders agreed that BTC / USD simply neutralized its overbought sentiments with a dip, adding that the pair will resume its rally.
“Expect increasing jolts,” market signal provider Credible Crypto said. “It looks like it was one of them. Still bullish. Invalidation at 15.8k but we still think we see new ones [all-time high] before reaching that level. “
Fed Meeting
FOMC minutes crossed the wire, but triggered small immediate moves in traditional and Bitcoin markets. Partly it was because Fed officials discussed the direction of their asset purchase programs instead of coming up with a definite strategy.
Some agreed that the Federal Reserve should continue to buy government and corporate debt at the current pace. At the same time, many argued “that the Committee may want to improve its asset purchase guidance soon enough,” suggesting that the central bank might change strategies based on economic conditions at that time.
Bitcoin rose more than 350% thanks to the Fed’s bond buying programs. Source: BTCUSD on TradingView.com
The minutes produced three consecutive results. First, the Fed may decide to buy more bonds. Second, the central bank could extend the maturity of the bonds it buys. Finally, it could aim to buy the same quantities and maturities of bonds over a longer period of time.
What it means for Bitcoin
The FOMC is navigating a perspective that is covered by the risk of the economic recovery slowing in the winter due to rising COVID-19 infection rates. Meanwhile, positive vaccine developments also raise the prospect of a strong economic rebound in early 2021, reducing the need for dovish Fed tools.
This has raised uncertainties as to whether or not the Fed will change its policies at its December meeting. However, bank officials said they will remain accommodative until their strategies heal the job market and hit more than 2% inflation.
FOMC minutes show Fed split on asset purchase plans https://t.co/FGbYcfBiz4
– zerohedge (@zerohedge) November 25, 2020
Bitcoin has seen an incredibly higher rally between ultra-low interest rates and the never-ending bond buying environment. Fed programs reduced Treasury yields and put further downward pressure on the US dollar. It left investors with no choice but to seek alternatives in riskier havens like Bitcoin.
The latest FOMC minutes leave cryptocurrency – at best – in uncertain bias. However, they do the same with the US dollar, which is now trading near its annual low. This could allow traders to stay where they are for a while. As a result, Bitcoin could preserve its bullish bias for the time being.
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