Federal Reserve (FED), the worst-case scenario is avoided! What consequences for Bitcoin?

The monetary policy decision of Wednesday March 20 was eagerly awaited by high finance and by investors in cryptocurrencies. Jerome Powell yesterday updated the FED's global-macro outlook, the opportunity to take stock of what is still the key factor for the current crypto cycle.

The issue of the timing and number of FED rate cuts this year

Jerome Powell's FED therefore unveiled a new monetary policy decision yesterday with a status quo in terms of key rates, and especially the update of the FED's global-macro projections as well as central forecasts for the evolution of the FED funds rate this year.

The FED was eagerly awaited in its reaction to the slowdown at the start of the year in the rate of disinflation and to weaker than expected US macroeconomic statistics, 2 factors which led the market to revise downwards its timing expectations. of the FED's pivot and the number of FED funds rate cuts by the end of the year.

Following the FED's announcements last night, here are the new market expectations regarding the outlook for monetary policy according to swap traders on the FED funds: institutional investors now anticipate 3 rate cuts with a pivot at the meeting on Wednesday, June 12. Note that 6 rate cuts in 2024 were expected in January.

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The FED therefore first updated its own expectations in terms of the Federal funds rate, this was by far the dominant fundamental factor most expected by traders, and Jerome Powell satisfied the markets by confirming that there will indeed have a pivot this year and 3 rate cuts by December 2024.

The FED then updated its inflation expectations, with a particular focus on the PCE price index in the underlying version (core PCE inflation, which integrates services more than the CPI; remember that the economy US is an 80% service economy and the US Central Bank still seems confident in its ability to bring core inflation down to 2% by mid-2025.

For the FED, the most important thing is to have confidence in a return of core PCE below 2%. It is currently at 2.84% and it will be updated during the stock market session on Friday, March 29.

It is imperative for the FED that this disinflation is not forged on an economic recession, that is to say that the long-term unemployment rate does not exceed 4.1% of the active population. For the bullish cycle of the crypto market, this combo of disinflation with the economic soft landing is at least as important as the halving to allow the upward momentum in crypto prices to further develop.

US macro and the FED's monetary policy must therefore remain central in the analysis of crypto trends.

FED Dot Plot

Graph representing the number of rate cuts considered by voting members of the FED (dot plots)

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Bitcoin is still building its wave 4 on a technical level

Volatility made a comeback after the price of Bitcoin reached its all-time high (ATH) for the month of November 2021. Never in its history has the pattern reached its ATH several weeks before the halving. Combined with a bullish excess of momentumthe market had to enter a correction sequence.

The BTC correction period triggered last Thursday by the US inflation figures (confirming in passing the strong impact of the US macro on the Bitcoin price trend) is fully part of a classic graphic pattern with the point of start of a wave numbered 4, the one which comes as a retracement of the vertical upward impulse between the end of January and the middle of March.

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In terms of so-called Fibonacci retracement ratios, a bottom was expected around the 38.2% retracement ratio, or between $57,000 and $60,000 depending on whether we use an additive scale or a logarithmic scale. The price of Bitcoin actually rebounded yesterday from 60,000 US dollars, so we must now cross resistance to restart the upward dynamic.

It is the resistance at $69,000 that must be overcome again to restart the basic upward trend in BTC.

Chart showing weekly Japanese candles (left) for the BTC/USD price

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