Powell and his Fed cut interest rates 25 bp – Bitcoin jumps above $10,000


In a much-anticipated dovish move, Fed Chairman Jerome Powell and his banking buddies capitulated to political pressure and market demand by cutting their benchmark interest rate by 25 basis points. Believe it or not, this was the first time that the Fed has cut its rate since 2008, which also meant that it was the first time that Bitcoin would react to a downward move in rates since its whitepaper was introduced a decade ago. Just as Mati Greenspan, the senior market analyst at eToro, prophesized, Bitcoin bolted north.

The world’s favorite digital asset had been ranging about $9,500 for days, but at 3:40 pm UTC on Wednesday, it suddenly jumped $600 to $10,073 and has been coasting along that level for the past five hours. Whether it will hold at this new level is up for speculation, but for those skeptics that were predicting a major move down to the $7,400 environs, it was time to step back and take another look at their technical guideposts.

The narrative that had been gaining favor within the analyst community was that Bitcoin had basically run out of gas. Its rise had been too “parabolic”. The result has been a lackluster July, where BTC has appeared to be trapped within a descending wedge formation, as depicted in the above chart. The “Double-Top” rejection below $14,000 had sent it reeling in a downward spiral. If Bitcoin were to break critical support at $9,000, then the next support level was far down the road — $7,400, marked in “Blue”.

The message now is that Bitcoin is at a crucial crossroad, where its near-term fate will be determined over the next few trading days, perhaps, even over the weekend when so many other breakouts have occurred. BTC seems poised at the upper boundary of the “wedge” formation. Stochastics are signaling an “oversold” condition and volumes are de minimis. It could bobble along a few more days between $9,500 and $10,000, but the “apex” of the wedge is fast approaching. Something has got to give.

DonAlt, a popular cryptocurrency analyst on Twitter, recently tweeted: “$BTC: The current range won’t hold for much longer. Once it breaks, I expect violence. Place your bets & stops carefully and enjoy the ride. I’m personally betting on a break upwards because longs offer better R:R at support but I could see this go either way.” The “R:R” is trader jargon for “Risk Ratio”, in this case meaning the odds favor a “break upwards”. Bollinger Bands have also contracted, along with a decrease in volatility, each a harbinger that a forceful move is imminent.

The race is now on to discover insights as to what the next direction might actually be. There are several analysts that continually point to Bitcoin’s “hashrate”, a measure of how much computing power miners are expending to solve transaction computations in the background, as a fundamental driver of Bitcoin prices. According to Hodlonaut, a popular figure within the cryptocurrency industry: “Sorry for being a broken record. But Bitcoin did set yet another hashrate ATH (All-Time-High) yesterday.” There is an ongoing debate as to whether the hashrate is a leading or lagging indicator.

While many analysts will argue that higher hashrates bode well for future prices, the jury is still out on this proposition. What else is happening in the news besides interest rate cuts and hashrate records? Another headline today was that LedgerX has beaten Bakkt in the race to be the first entity to offer “physically settled” futures contracts in Bitcoin. The announcement from LedgerX officials came on social media: “It’s official: we’re live with retail trading on Omni!” Bakkt is currently in acceptance testing mode and plans to go live in the not too distant future. Per press reports:

Trading on Omni is open only to U.S. and Singapore residents, subject to a minimum deposit of $10,000 or 1 BTC.

At this juncture, patience would be the prudent path. Although the odds may slightly favor a breakout that resumes the predominant trend that began in February, i.e., an upward move, Bitcoin has always confounded analysts by ignoring time-honored technical traditions. Veteran traders would counsel to wait until a breakout is confirmed before making orders. Betting on a direction at times like these is a strategy for failure.

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