Positive Sentiment, Bitcoin and Other Crypto Prices Strengthen Ahead of The Fed's FOMC End of July

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Bitcoin and other crypto prices have rallied well starting Monday (7/18/2022), due to positive sentiment, although the market awaits the Fed's FOMC end of July which may raise interest rates more aggressively by up to 100 basis points.

As of Monday evening, Bitcoin price was up 6 percent in the last 24 hours to $22,400, the highest level since a sell-off in mid-June that pushed the biggest cryptocurrency down from $30,000 to $18,000. Until Tuesday (18/7/2022) morning, BTC perched nicely in the range of US$22,900.

"Bitcoin is back above $20,000 as Wall Street is becoming a bit more optimistic about risk assets," said Edward Moya, analyst at Oanda.

Other crypto assets have also increased. Ether rose 11 percent to $1,500, also hitting its highest level in more than a month. It was more the same among the smaller altcoins, with Solana up 7 percent and Cardano jumping 10 percent. Memecoin was also strong, as Dogecoin and Shiba Inu jumped 7 percent and 9 percent, respectively.

This big buying action clearly reflects the positive market sentiment towards crypto and capital markets in the US, as these two types of markets tend to align, especially in technology sector stocks.

Bitcoin's move higher followed similar action in the stock market, with the Dow Jones and S&P 500 gaining a month last Friday and rising again on Monday.

Equities and cryptos both suffered last week as hot inflation data raised concerns that the Fed will have to move more aggressively to tighten monetary policy, risking triggering a recession. However, investors appear to have allayed these concerns, with stocks and cryptocurrencies benefiting.

“Crypto markets have seen a relief rally. When the market starts to react positively to negative news, this is a signal that local lows are already forming now,” said Marcus Sotiriou of GlobalBlock.

However, the market is still waiting for a decision on the results of the Fed's FOMC meeting at the end of this month, whether to raise interest rates to 100 bps or soften slightly to only 75 bps as last month.

Aggressive rate hikes were powerful enough to blow the US dollar, triggering a short sell-off in the crypto and stock markets. According to the Fed's website, this month's FOMC will be on July 26 and 27, 2022.

Bitcoin Price is Strong as US Dollar is Weakening

One of the main factors in the strengthening of the stock and crypto markets is the weakening of the US dollar since Monday (18/7/2022) which is marked by the dollar index dipping below the MA50 on the 4-hour time frame, the price of Bitcoin and other cryptocurrencies in the green. Also be aware of the potential for a Fed rate hike at the end of July 2022.

A weaker US dollar, as the dollar index (DXY) corrected from the local high, 109 on July 14, 2022, provided a breath of fresh air to the crypto market.

The decline became even more pronounced on July 18, 2022, when the DXY candlestick was in the 4-hour time frame, the Super Trend indicator gave a sell signal. Even DXY plunged quite far below the Moving Average (MA) 50 line.

With the Bitcoin price recovering above $22,000, there has been a lot of excitement among Bitcoin investors so far. This new price point follows many bullish and bearish trends.

But in large part, that's thanks to the semblance of normality that was returned to the market after a number of crypto companies went bankrupt. This has catapulted to the point where investors have accepted reality and are looking more to the future.

With the return of some normalcy, a bullish accumulation trend emerged among investors. A clear case of this is the number of investors holding more than 1 BTC in their accounts.

According to Glassnode this number hit a new all-time high in the early hours of Monday with 1,557,225 BTC addresses with 1+ BTC in their balance. This accumulation trend is undoubtedly one of the driving forces behind the price recovery.

Has the BTC Support Level Been Reached?

The latest recovery is gaining further discussion as to whether BTC has found its best support level, when it touched US$17,600 last month.

To measure this is indeed very difficult. However, reflecting on the bears in 2018, the price of BTC is down 84 percent from its record high. If it repeats now, then we will see a low of around US$13,000.

The results of the Finder.com expert panel survey a few days ago said that the market was still bearish. Most observers agree that BTC needs to drop further in the $13,600 range. The main factor is the pressure on the US dollar due to the Fed's rate hike and also reflecting the 2018 decline.