- Bitcoin and Ethereum have seen disappointing performance following the Federal Open Market Committee’s (FOMC) decision, diverging from the reaction seen in traditional financial markets.
- Both cryptocurrencies have breached the lower limit of their Bollinger Bands, indicating that they have moved into technically oversold territory.
In the aftermath of the Federal Open Market Committee’s (FOMC) decision to halt interest rate hikes, Bitcoin and Ethereum’s performance have been lackluster, in stark contrast to the traditional finance sector’s response. Both digital assets have crossed the lower boundary of their Bollinger Bands, an indication of a technical move into oversold territory.
On Thursday, Bitcoin and Ethereum took a nosedive into oversold territory, triggered by the ‘hawkish’ remarks by Jerome Powell, Chairman of the U.S. Federal Reserve. This happened following the central bank’s decision to put a stop to the 14-month succession of interest rate hikes.
The extent of the ‘hawkish’ view is debatable, but it’s clear that the pause in interest rate hikes and maintenance of the 5.0-5.25% target rate were widely anticipated, and likely already factored into the market. The market reacted to increases in projections for Core PCE inflation and the Federal Funds rate.
Despite the recent data suggesting economic progress, the market sentiment indicated that inflation continues to be high and problematic. Chairman Powell mirrored these sentiments in his Wednesday remarks, committing to future monetary tightening and justifying the pause with reference to economic “lags”.
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The significant selloff of Bitcoin and Ethereum is evident in both digital assets breaching the lower range of their Bollinger Bands—a technical tool that tracks a 20-day moving average and draws two standard deviations above and below. A breach of the upper or lower range is viewed as a noteworthy event as an asset’s price is expected to remain within two standard deviations of its average 95% of the time.
The downturn in Bitcoin and Ethereum runs counter to Thursday’s positive performance in traditional markets. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite increased 1%, 0.92%, and 0.82%, respectively, whereas Bitcoin and Ethereum witnessed declines.
This disparity in performance could be attributed partly to the additional regulatory burden impacting crypto markets. For instance, the Securities and Exchange Commission (SEC) is keeping a close watch on cryptocurrency markets. CoinDesk’s Indices tools underline this decline, signaling a downtrend phase for both Bitcoin and Ethereum.
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