Bitcoin holds $28,000 as it awaits Powell and the Fed

César Nuez, technical analyst at Bolsamania, points out that the queen cryptocurrency has "substantially" improved its technical appearance by managing to overcome the key short-term resistance it presented at $25,270. "The cryptocurrency confirms the formation of a throw back to the 200-session average and covers the bearish gap left in mid-June last year," the expert explained, as he believes that "we could be at the beginning of a more solid recovery of its technical appearance." "However, the key resistance level is near the $30,000 level. Only after overcoming this price level, would we think of a medium-term recovery," he added.

The fact is that Bitcoin has not stopped rising since the beginning of the banking crisis. The reigning cryptocurrency has accumulated gains of around 40% since the collapse of Silicon Valley Bank on March 10 until today. While some enthusiasts attribute this to the qualities of Bitcoin and cryptos in general, others believe that this rally is due to technical factors and other circumstances such as the possible relaxation of monetary policy in the United States.

In this sense, today, on Wednesday, it could be confirmed that the Federal Reserve (Fed) will step on the brakes and execute an interest rate hike of 25 basis points. There seems to be some consensus on this, as reflected by CME's FedWatch tool, which gives an 87.8% probability that the U.S. central bank will take rates to the 475-500 range. However, "no one really knows how much weight the Fed will give to the latest banking tensions."

This is what Ipek Ozkardeskaya, senior analyst at Swissquote Bank believes, as she noted that the difficulties experienced by banks such as First Republic "resulted in an uptick in Fed’s balance sheet due to additional liquidity, but also tightened the financial conditions sharply." "The gap between high yield and sovereign bonds popped above the 5% psychological mark – which traditionally served as a red flag hinting at higher-than-average credit risk in the market," she explained.

"And the higher credit risk, and tighter credit availability hint that the US economy could indeed continue to slow, and eventually step into recession – which would, in return, slow demand and pull inflation lower without further intervention from the Fed," Oskardeskaya added.

For Michael Hewson, chief market analyst at CMC Markets UK, a pause or a cut in hikes, as some market voices have advocated, is completely off the table. "At this point a rate cut is a ridiculous notion and would completely send the wrong message at a time when optics are everything. If the Fed does have concerns about some parts of the US banking sector, why weren’t they apparent 3 weeks ago when they were pushing the case for keeping a 50bps rate hike on the table? Ultimately a rate cut could prompt further volatility, prompting a market freak out in that the situation could be far worse than realised," the expert explained.

"Even a pause has the potential to be unsettling given Powell’s recent comments to US lawmakers which showed the Fed is becoming increasingly concerned about rising prices. He might be able to make it fly if he made it clear that hikes would resume once the picture becomes clearer, and that we aren’t about to feel any aftershocks, but it might be a tough sell. Even with the choppiness caused by recent events the view on sticky prices is unlikely to have changed much, given the strength of some of the recent economic numbers. How Powell manages market expectations at his press conference, especially with respect to how events have affected today’s decision will be as equally important as the decision itself," Hewson added.

As for the rest of the market, there have been similar movements. Ripple (XRP) rallied 19% in the last 24 hours, and Cardano (ADA), soared 12%.