BTC Breaks Below Bollinger Bands Amid Anticipation of Fed Rate Hike

Despite being historically sensitive to macroeconomic events, Bitcoin has recently displayed limited price movements in response to rate hikes, inflation, and GDP data.

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Bitcoin's price has once again captured the attention of traders and investors as it broke below its lower range of the Bollinger Bands on Monday. This development comes just ahead of the Federal Reserve's crucial two-day monetary policy meeting, where it is widely expected that interest rates will be raised by 25 basis points.

While the anticipation of a rate hike would typically cause more pronounced reactions in traditional markets, the cryptocurrency markets have displayed a diminished response to such macroeconomic events.

Significance of Bollinger Bands

In the past, rate hikes in both May and March led to relatively modest price moves of 1.13% and -2.87%, respectively. Similarly, Bitcoin's reaction to recent inflation and GDP data was also subdued, with price moves of just -0.74% and 1.16%, respectively, following each occurrence.

It appears that crypto markets have already priced in the upcoming rate hike, with Bitcoin traders more intrigued by the coin's recent movement below the lower range of its Bollinger Bands. The Bollinger Bands, a popular technical indicator, track an asset's 20-day moving average and plot price levels two standard deviations above and below the average. Typically, an asset's price is expected to stay within two standard deviations of its average around 95% of the time, making a breach of the external bands statistically significant.

Trade Range Narrowing

For Bitcoin, traders are now eyeing an upside target of $30,000, which aligns with the coin's 20-day moving average. At this level, a high volume area of activity indicates that there is a considerable amount of price agreement, suggesting that Bitcoin's price is likely to increase slightly. However, analysts warn that this advance may run into overhead resistance due to the narrowing trading range and decreased volatility observed in recent times.

Considering the current average true range (ATR) of $737 and the spread between BTC's current prices and its 20-day average, which is approximately $900, even a 3% price increase to reach the 20-day average could mildly increase Bitcoin's volatility. This indicates that while traders may anticipate a modest upside, sharp price swings are not expected.

Confidently Cautious Approach

On-chain data from analytics firm Glassnode paints a picture of strong confidence among Bitcoin holders, both large and small. Despite the ongoing trend of moving Bitcoin away from centralized exchanges, which could partly reflect distrust in these platforms, the overall Bitcoin wallet balances have remained stable. This trend underscores the current inclination for HODLing, indicating a robust level of confidence in the asset's long-term prospects.

As Bitcoin makes a subtle move below the Bollinger Bands, traders are closely monitoring its potential for a slight price increase targeting the $30,000 level. While the crypto markets seem to have priced in the anticipated Fed rate hike, a cautious approach is advised due to the limited upside and potential increase in volatility. The on-chain data continues to show unwavering confidence among Bitcoin holders, further cementing Bitcoin's position as a store of value amid uncertain times.