The Federal Reserve raised interest rates by a rare half percentage point on Wednesday as it works to reduce its $9 trillion asset portfolio.
The decision, announced by Fed Chairman Jeremy Powell after a two-day policy meeting, is the most dramatic tightening of monetary policy over the past decades. The move aimed to mitigate the negative impacts of an economic stimulus that led to soaring inflation.
Inflation is far too high, and we recognise its challenges, said Powell during Wednesday’s press conference. He also added that the Fed aspired to increase rates in the upcoming meeting sessions, citing the economy’s strength and capacity to manage tighter monetary policy.
Although the news caused ripples over the several days, forcing Bitcoin to drop below $38,000 when traders sought gains ahead of the Fed meeting, it also rocketed crypto values.
Within two hours of the meeting, major cryptocurrencies enjoyed a surge, with Bitcoin jumping over 5.8% to $39,784. Ethereum also increased by more than 6% to $2,957, whereas most altcoins increased by 10%.
Bitcoin’s daily chart also displayed a positive RSI divergence, indicating bulls are regaining market control. On Tuesday, Santiment, a crypto behaviour analytics platform, identified a tight “wedge” pattern on the daily charts of BTC and ETH.
Source: TradingView
Although Santiment cautioned against speculating on the future direction of price, a declining wedge pattern is often followed by a bullish trend after price breaks out to the north of that tight squeeze.
Once the star aligns (meaning that most players begin to behave similarly), significant price action will follow quickly, said Santiment.
This trend seems to have ramped up considerably, with BTC climbing to test the wedge’s top border.
Additionally, Santimenty revealed several on-chain discrepancies in the behaviour of “daily active addresses” on both BTC and ETH and warned traders to look out for something brewing. It shared a graphic demonstrating a huge rise in ETH network activity, or a “massive spike of hope”, although Bitcoin’s chart showed minimal activity.
Source: Santiment
Such optimism was risky since it had created enormous unease among individuals who had purchased these cryptos. This, along with BTC’s poor network activity, would almost always result in a price fall, but we can see the final capitulation as a healthy sign if that occurs.