The Bitcoin price rally has stalled for five days now. After BTC experienced a furious surge from $21,000 to $23,000 last Friday, the price is now in a consolidation phase. The reasons for this are diverse.
As NewsBTC reported, Bitcoin’s Relative Strength Index (RSI) on a daily basis is showing severe overheating. The technical indicator reveals that the BTC price is in heavily oversold conditions.
During the recent upward movement, the daily RSI was near 90 at times but has since cooled to 78 at press time. The stalling of the BTC price at $23,000 could therefore signal a healthy consolidation and a reset before a new price rally could be on the cards.
Another key factor for the Bitcoin price in recent weeks has been its correlation with the U.S. Dollar Index (DXY) and the S&P 500. Generally speaking, a weakening dollar is bullish for risk assets like Bitcoin and the S&P 500.
However, the weekly chart of the DXY reveals that the dollar index is still holding above its weekly support at 101, which experts consider an extremely crucial support level.
If the DXY breaks below this mark, things would be extremely bullish for the Bitcoin price. However, due to the still-standing support, the euphoria among risk investors may have also come to a halt for the moment.
FOMC Meeting Will Be Decisive For Bitcoin Price
The next FOMC meeting of the U.S. central bank will take place in just one week, on February 1, and will probably set the course for another bull or bear trend.
According to the CME FedWatch tool, 98.2% currently assume that the Fed will further reduce its rate hike pace and raise only 25 basis points. But statements from Fed Chairman Jerome Powell will also be crucial.
Thomas Lee of Fundstrat Global Advisors assesses that inflation has “literally hit the wall” since October and that core inflation is not “sticky,” contrary to the Fed’s initial expectations. According to Lee, the bearish sentiment in the stock market in December was triggered by an “unforced error” by the Fed and led to the FOMC saying inflation was hotter in December.
As a result, Fundstrat expects the FOMC to make a “course correction” in February, meaning financial conditions will loosen and the VIX will fall, which in turn will drive risk assets higher.
However, Lance Roberts, chief strategist at RIA Advisors, warns that the Fed doesn’t like the current rally in financial markets and…