On July 31, 2024, the Federal Reserve held its monthly FOMC meeting to clarify their thoughts on inflation and their interest rate decision. With the Fedwatch reading a 100% expectation for a rate cut in September, many investors were hoping for a dovish tone – and that is exactly what they got.
Tackling a myriad of difficult questions, Chair Powell ultimately said three key statements that boosted the markets’ confidence for a rate cut:
- He said the economy was “normalizing” and that the time for cutting rates “is approaching”.
- The jobs market was “strong but not overheated”.
- Inflation was cooling down as per the Federal’s preferred measure: PCE and Core PCE.
In spite of the positive market outlook, the Bitcoin price has seen a decline from $66,800 to $62,200 within 24 hours from the meeting. So let’s take a look at a few reasons why this decline happened.
Technical Analysis of Bitcoin (August 2nd, 2024)
There are a few possible reasons for this sell off. The first being the concept of buy the rumors, sell the news. With the FOMC meeting being extremely dovish, it was the perfect time to sell the news.
Beyond that, we also have technical factors influencing the selloff. The Bitcoin price simply was not at a significant support level to see a powerful push higher. Furthermore, Bitcoin was declining from a selloff at $70,000, reached just a week before the FOMC meeting.
| Technical Reasons for the Selloff at $70,000: The price has reached the descending channel’s highs and a Daily Fair Value Gap formed since June 2024. Investors from $56,000 were also incentivized to sell at a premium for a nice return. |
Bitcoin currently has now tapped a significant support zone from $63,000 to $64,000. Furthermore, it’s come back to fill a Daily Fair Value Gap from $61,300 to $62,400. These areas may propel Bitcoin to retest the descending channel’s highs, aligning with the Point of Control at $67,170, established since the massive rally from March.
However, it’s important to note that Bitcoin has now successfully formed a bearish Double Top Pattern on the daily timeframe. A break and close below the neckline at approximately $63,000 will confirm the pattern, potentially leading to a bearish reversal to $57,000 – with stops along the way at the channel’s midline and fair value gap of $59,700 to $60,600.
Given that risk-on assets typically rise during rumors of a Fed pivot and then decline sharply after a Fed pivot rate cut, this situation is unusual.
Bottomline, if Bitcoin is able to break the descending channel, and stay above $70,000 – $72,000, we will likely see a bull run towards $85,000 and higher. If it breaks down from the Double Top neckline, we may revisit $57,000 – but personally, I think the psychological level of $60,000 will be an ultimate support zone.
Technical Levels to Watch if Bitcoin Rises:
| Point of Control,Descending Channel Highs | $67,170 |
Technical Levels to Watch if Bitcoin Falls:
| Neckline | $67,170 |
| Daily Fair Value Gap 1 | $61,300 – $62,400 |
| Daily Fair Value Gap 2 | $59,700 – $60,600 |
| Descending Channel Middle Line | Approximately $59,500 |
| Double Top Target | $57,000 |
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