Signs that the end of the rate-hike cycle for the the Fed could be the catalyst for a strong Bitcoin rally. According to Matrixport analysts, the first cryptocurrency could rise about 20%, to $35,000–$36,000.
2/10: A #breakout could lead to a 20% increase from current prices, setting a target of $35,000/$36,000 for #Bitcoin (#BTC). pic.twitter.com/zCctXEX8gC
— Matrixport (@realMatrixport) May 4, 2023
On May 3, the Fed raised the target range for the federal funds rate by 25 basis points, to 5.0–5.25%. Bitcoin held above $28,500.
Earlier, Fed Chair Jerome Powell, in testimony before Congress, stated there was a high likelihood of further tightening of monetary policy. However, the collapse of U.S. banking institutions and the Swiss investment bank Credit Suisse led investors to expect more accommodative steps from the regulator.
Analysts at Matrixport also cited turbulence in the U.S. banking sector, which requires liquidity injections and guarantees for buyers of bailed-out institutions, as a factor in the end of the rate-hike cycle.
From a technical-analysis perspective, specialists pointed to an imminent breakout above the upper boundary of a contracting wedge. Confirmation of the hypothesis would push the price higher toward the height of the pattern.
In addition to the Fed as a driver, analysts named the resumption by corporations of share buybacks on the market after the quarterly earnings season as a driver. In total, companies could spend up to $1 trillion on these buybacks this year.
This will continue to be a tailwind for stocks and risk assets in general, the experts said.
Matrixport noted a contraction in trading volumes, emphasising ‘limited resistance on the way up.’
Analysts also noted activity in meme tokens DinoLFG, Pepe, Wojak, Chacon and IgnoreFud as a sign of improving sentiment in the cryptocurrency market.
Projected May figures could push mining fees as a share of total miner revenue to levels we saw in May 2021, they concluded.
Earlier, Matrixport indicated the limited effect of Mt. Gox compensation payouts.
As the Fed meeting approached, bearish sentiment in crypto funds intensified.
Galaxy Digital CEO Mike Novogratz forecast that Bitcoin would reach $40,000 after the Fed began cutting the federal funds rate.