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This is why Bitcoin price has given back all of its intraday gains

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On December 14, Bitcoin (BTC) price hit a highest level in one month It experienced a brief revival bullish momentumHowever, the dovish FOMC report and comments from Fed Chair Jerome Powell sent BTC to an intraday low of $17,659.

Stocks and Bitcoin started the day slightly higher but quickly fell back in the FOMC report. So far, the price of bitcoin is still closely correlated with stocks, and most investors are concerned about the impact of the price increase in the future.

Bitcoin’s correlation with the Dow Jones and the S&P 500. TradingView

Rising interest rates and hawkish talk from Powell affect the price of Bitcoin

While the consumer price index (CPIThe report showed inflation declining at 7.1%, and Powell still wants to reach an overall inflation rate of 2%. Inflation was a critical factor in raising interest rates and the current 0.5% rise was the consensus among FOMC participants. Fed members also agree that rate hikes should continue into 2023.

The Federal Open Market Committee surveys future rate hikes. Source: Federal Reserve

During the December 14 press conference, Powell stated:

“We may see higher rates for longer to achieve the 2% inflation target.”

This hawkish tone, along with the FOMC survey, shows that interest rates will continue to rise for the foreseeable future.

What will Bitcoin do next?

Bitcoin’s short-lived rally ahead of Powell’s speech correlated with the price action seen across other risky assets. After Powell’s speech and the FOMC, these assets continued to correct, some analysts believe The recent decline as a measure of buying More bitcoin.

Assets are linked to risk. Source: Delphi Digital

Late longs of the current rally could be at risk of liquidation if the BTC price continues to correct. According to derivatives data, open interest on Bitcoin shows that 60.16% of traders are buying.

Bitcoin price to buy. Source: Coinglass

At the moment, the market is digesting the views expressed by the FOMC and Powell, so the sudden surge in short-term volatility is not abnormal. Investors should watch the next few daily closes to see if the macro trend in Bitcoin changes.