FED Chair Powell Spooks Cryptos with Rate Hike and Recession Talk

Key Insights:

  • A bearish Thursday session left Bitcoin (BTC) down 2.14% to end the day at $40,491.
  • Fed Chair Powell sank the U.S equity and crypto markets with talk of a recession and a 50-basis point rate hike.
  • Technical indicators are bearish, with BTC tumbling through the 50-day EMA.

On Thursday, Bitcoin (BTC) fell by 2.14%. Following a 0.31% loss on Wednesday, BTC ended the day at $40,491.

A bullish start to the day turned sour as the markets responded to a scheduled Fed Chair Powell speech at the IMF.

Bitcoin had hit a day high of $42,997 to test resistance at $43,000 before tumbling to a day low of $39,865.

Elsewhere, AVAX (-4.00%), BNB (-3.25%), ETH (-3.03%), LUNA (-4.84%), and SOL (-3.63%) struggled.

ADA (-2.88%) and XRP (-2.53%) saw relatively modest losses.

Fed Chair Powell’s Speech Pummels Riskier Assets

On Thursday, Fed Chair Powell spoke at the Annual Economic Policy Conference National Association for Business Economics.

There were two key takeaways from the Powell speech. Firstly, the prospect of a fifty-basis point rate hike.

Discussing restoring price stability, Powell said,

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or in meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Secondly, Powell talked of the challenges of bringing down inflation without bringing down the economy.

Concerning growth, Powell said,

“I hasten to add that no one expects that bringing about a soft landing will be straightforward in the current context – very little is straightforward in the current context. My colleagues and I will do our very best to succeed in this challenging task.”

The combination of a more rapid move to policy-neutral and possibly beyond and the threat of recession weighed on riskier assets.

On Thursday, the NASDAQ 100 tumbled by 2.07%, with the futures in the red this morning to pressure the crypto markets further.

Bitcoin Price Action

At the time of writing, Bitcoin was down by 0.50% to $40,287.

BTCUSD 220422 Daily
Failure to return to $42,000 could leave Bitcoin under heavy selling pressure.

Technical Indicators

Bitcoin will need to move through the day’s $41,114 pivot to make a run on the First Major Resistance Level at $42,369. Bitcoin would need broader market support to return to $42,000 levels.

In the event of another extended rally, Bitcoin could test the Second Major Resistance Level at $44,252. The Third Major Resistance Level sits at $47,382.

Failure to move through the pivot would bring the First Major Support Level at $39,240 into play. Barring another extended sell-off, Bitcoin should avoid sub-$39,000. The Second Major Support Level sits at $37,985.

BTCUSD 220422 Hourly
Failure to move through the pivot would leave support levels in play.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. Bitcoin sits below the 50-day EMA, currently at $41,065. This morning, the 50-day EMA pulled back from the 100-day EMA, testing support. The 100-day EMA pulled back from the 200-day EMA, BTC negative.

A move through the 50-day EMA would support a return to $42,000 levels.

BTCUSD 220422 4-Hourly
A move through the 50-day EMA would bring $42,000 back into play.