Investor expectations for the pre-New Year rally were shattered by categorical statements from Fed officials. The regulator gave a pessimistic forecast for 2023, which significantly spoiled the emerging buying interest in cryptocurrencies.
The Fed is confident that the U.S. economy will face a serious test in 2023 in the form of a recession. Several more cycles of rate hikes to the level of 5.5% are also expected, which indicates the regulator's doubts about the current rate of inflation decline. In addition, Federal Reserve Chairman Jerome Powell is confident that no key rate cut is expected in 2023.
Against the backdrop of disappointing forecasts, the stock market experienced a sharp surge in sales. Similar dynamics was observed in the crypto market, where Bitcoin again dived below the $18k level. Major cryptocurrencies followed BTC, causing the market capitalization to drop to $782 billion.
The situation is complicated by local factors that can exacerbate the fall in the capitalization of cryptocurrencies. The situation for the mining industry continues to worsen due to the energy crisis. In addition to selling equipment, more and more cloud services prohibit miners from using their power to mine cryptocurrencies.
Also, a complete ban on mining in the EU is expected in the near future. The situation with Gemini and Genesis remains uncertain, which serves as a deterrent for investors.
BTC/USD Analysis
After peaking at $18.4k, Bitcoin formed an uncertain green candle with a long top wick. This indicates the activation of sellers and the loss of initiative by the bulls. Subsequently, the price continued its downward peak, and the buyers failed to absorb the volumes.
As of December 16, the bears have completely managed to absorb the bulls' volumes and start an assault on the $17k support level. The main task of the bulls at the current stage is to protect the $17k line in order to keep the chances of an upward trend. Both sides continue to move towards $16k for the final retest of the local bottom.
The trading week will end under full bearish control, but reduced trading activity over the weekend could help buyers keep the price above $17k. Bitcoin technical metrics point to the continuation of the downward trend of the cryptocurrency and the growing dominance of the bears.
Results
Most likely, Bitcoin will continue to decline over the weekend due to a significant build-up of bearish volumes above $18k. At the same time, the closure of the American markets can remove some of the pressure from the cryptocurrency, so the asset has a chance to hold the $17k mark.
Given the strong bearish pressure, this could happen via a false breakout of $17k, as was the case with $18k. The signal for a reversal may be the activation of buyers in the area of the local support zone of $16.7k. With a full breakdown of this level, the price will most likely retest the $16k level.
