FED announcement: How did it impact the crypto market?

The previous week had the effect of a cold shower. While the prices of cryptocurrencies had been weakening steadily since December, Bitcoin collapsed. Obviously, it took all the altcoins with it and caused a general panic. The specter of a bear market is once again on the rise, causing fears of further declines. The approach of the FED announcements on Wednesday, January 26th was probably the cause of this widespread chaos.

Bitcoin's Price Evolution Over the Last Half Year.

The fall of 2021 has been a happy time for the cryptosphere. Despite a rollercoaster ride, Bitcoin was able to break its all-time high and reach $69,000. Altcoins were also able to benefit from this euphoria. Avalanche, Solana, Elrond among others also blew up their ATH on several occasions. However, the end of the year was more than a little gloomy. Since mid-November, we have seen a steady decline in bitcoin and some altcoins have lost a significant amount of their capitalization. While there is no general state of panic, this decline has raised concerns about the future of the Bull Run. More and more investors felt that we were in a profit-taking or pullback period. Even if decentralized finance played a role of shock absorber given the sums present on these protocols, confidence was starting to crumble.

In fact, it should be understood that outside of the economic context outside of the cryptocurrency field. The year 2021 has seen the launch of many blockchains. These successive launches have been the occasion of several bullish rallies (we can think of those of Elrond, Cronos or MetisDAO). We are therefore in a necessary breathing period. Once launched, these networks must now deliver on their promise for investors to increase their position.

FED Announcements

The dynamism of the crypto market over the past year also depends on the health context. The global pandemic present since 2020 has slowed down the economy considerably. Faced with this crisis, the states have supported companies by granting loans, tax cuts and injecting money. These measures obviously have a counterpart. Fiduciary currencies, the euro and the dollar in particular, have lost value. Cryptocurrencies, and in particular bitcoin, have benefited greatly from this situation because they have been seen as a safe haven. In addition, this sector can continue to operate with remote work. It is therefore little impacted by the health environment.

As we approach the end of the health crisis, its multiple supports to the economy may disappear. This is what everyone feared with the FED's announcements on Wednesday night. If the FED raised its key rates too quickly, bitcoin would no longer be as attractive against the dollar. In fact, the FED played the delaying card instead. A rate hike is confirmed but it will only happen in the spring. The cryptocurrency market has therefore not reacted since Wednesday evening because the fall of last week had already reflected this announcement. We could even talk about over-anticipation in this case and since last week the price of bitcoin seems to be back in a similar range as this summer.


Will Bitcoin regain its historical value?

The question is whether bitcoin will stay in its range or resume its ascent. No one has a crystal ball. But we can read two main scenarios. We go up or we go down! On a more serious note, bitcoin is between two resistances, the $38,000 resistance and the $30,000 resistance. It can stay in this range for several weeks and that would be the healthiest as it would mean that we are in an accumulation period between the return of a bullish outlook.

So we can hope that the 30,000 resistance is not broken at some point for this recovery to take place. It is almost undeniable that it will take place if this condition is met. Indeed, all the blockchains that have launched will start to see projects develop on their network. This phase of materialization will therefore stimulate the crypto sector again. We can therefore expect a new phase of increase.

The beginning of the year has been more than eventful. Successive declines in bitcoin have put the market under severe strain. Anticipating the FED's announcements, the cryptocurrency market plunged again a few days ago. Fortunately, the sector's momentum suggests that a final bullish push is coming before a bear market at the end of the year.

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