Bitcoin Analysts React To Fed Rate Hike: Is A 'Short Squeeze' In Cards Above $40K Level?

On Wednesday, the U.S. Federal Reserve hiked the target fed funds rate by 0.25% to between 0.25% and 0.5%. This is the first such rate hike since 2018. Here is what analysts have to say on the development:

Expect More Rate Hikes: OANDA Senior Market Analyst Edward Moya, said in a note, that Federal Reserve took stock of elevated inflation and the ongoing invasion of Ukraine — which will create additional upward inflationary pressures. 

“The dot plots show that the Fed is expecting to raise rates at every meeting going forward. The Fed also said they will begin reducing its asset holdings at a coming meeting,” said Moya.

The analyst does not see a significant upsurge in the price of the apex coin. He said, “Bitcoin remains stuck in its $37,000 and $45,000 trading range and that should remain the case over the short-term.”

See Also: How To Buy Bitcoin (BTC)

Weak Macro Environment Persists: Delta Exchange CEO and UBS alum Pankaj Balani said in a note seen by Benzinga that a significant amount of shorts have built up near the $40,000 zone.

“This creates a possibility of a short squeeze, any conclusive break above 40,000 can see a sharp move up. Such a squeeze can potentially push to [the] 45000-47000 zone.”

“The macro-environment remains weak amid the geopolitical tensions and high inflation expectations but despite a gloomy outlook and selling in risky assets, BTC has managed to trade sideways.”

Balani said they noted interest to own the short-term and medium-term volatility on BTC at the levels persisting before the Federal Reserve announcement. 

Don’t Expect Much In 2022: GlobalBlock analyst Marcus Sotiriou said the market could see short-term relief in the coming days and weeks as protective positions unwind after the highly anticipated rate hike. 

“I think Bitcoin and the crypto space is unlikely to gain significant traction in 2022. This is because the Federal Reserve is taking liquidity away from markets and people may have less money to spend on ‘risky’ investments due to surging inflation,” said Sotiriou.

Price Action: Bitcoin traded 5% higher at $41,083.57 over 24 hours at press time. The apex coin has gained 4.5% over seven days.

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