Could the Federal Reserve’s announcement trigger a huge Bitcoin crash?

Bitcoin and other cryptocurrencies might see a significant drop after the announcement of the US Federal Reserve’s interest rate decision on Wednesday, analysts have warned. According to Forbes, Bitcoin might drop by up to $10,000 at its present price and finish up around $28,000.

Bitcoin and other cryptocurrencies have historically been very volatile investments, with dramatic falls after a tweet from a billionaire and rallies to all-time highs in a matter of hours. However, May has historically been a great month for Bitcoin in comparison to the US currency. As a result, many investors will be taken aback by the warning of a fall.


Why is Bitcoin at risk of collapsing now?

Bitcoin is already selling at about half the price it was in November of last year, and a further decline in its value would be devastating for many. However, if the collapse occurs, it will very certainly be a result of the US central bank’s monetary tightening in an attempt to contain inflation. According to Forbes, the Federal Reserve may raise interest rates by much to 50 basis points—the largest rise in 22 years. Such a record surge is certain to result in the squeeze of assets across the board, including bitcoin and other cryptocurrencies.

However, Coindesk’s research found that monitoring Bitcoin’s ups and downs over the years revealed that the cryptocurrency follows similar tendencies to other goods in conventional finance and is as susceptible to inflation and central bank monetary policies as stock prices are.

If it were true, would there be any indications indicating an impending crash? Experts concur.


Signs of an impending cryptocurrency collapse

Arcane Research’s analysts calculated the connection between Bitcoin and the Nasdaq to be 0.7. The scale’s extremes were 1, which meant that prices were fully in sync, and -1, which meant that prices moved in the opposite manner. While the connection indicates that the prices were more likely in sync, analysts informed Coindesk that Bitcoin prices do not follow equities markets; rather, macroeconomic variables have the same effect on Bitcoin as they do on other markets. Bitcoin is unlikely to be spared if the Federal Reserve continues on its path of monetary tightening.

Technical analysis of price charts is another method for forecasting the future direction of cryptocurrency. According to experts, investors have been negative about Bitcoin for a long period of time, and examining current patterns indicates that Bitcoin is likely to continue to decline in the near future, if not collapse completely.

Because bitcoin transactions are public on the blockchain, researchers can also track the purchase prices of cryptocurrency by majority holders (10-100 BTC), commonly known as Whales. The coin’s price in the short term is expected to be the lowest price or generational bottom for each cohort. According to Coindesk, this price is now between US$ 25,000 and $27,000, which means that the value might potentially fall from the $39,000-plus price at the time of this writing.

The Federal Reserve’s interest rate announcements may act as a catalyst for what is a foregone conclusion in any case.

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