beehiiv-import

⚡Fed's Surprise About BTC💥

Croxroad

22 Sep 2023 — 6 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

⁉️ Fed Rate Decision Stuns Bitcoin Volatility

The Federal Reserve (often called 'the Fed') is going to tell us what they're doing with interest rates this Wednesday at 2:00 PM Eastern Time. Now, some smart folks who keep an eye on how people are betting on the price of Bitcoin are saying that it doesn't seem like Bitcoin will go up or down by more than 3% by this coming Friday. So, it looks like Bitcoin might stay pretty stable for a few days, based on how people are trading options related to it.

Basically, the wild ups and downs we usually see in the price of Bitcoin have been pretty calm lately. That's kind of like what's been happening in the regular stock and bond markets in the U.S. Some people who watch Bitcoin closely think that this calm period will keep going even after the Federal Reserve makes an announcement about interest rates this Wednesday at 2:00 PM Eastern Time.

The Fed isn't just saying what they're doing with interest rates, they're also giving out some other info like economic projections and estimates about where interest rates might go. The head of the Fed, Powell, will also talk to the media about it.

So, why does this matter for Bitcoin? Well, when the Fed started raising interest rates back in March 2022, it caused some craziness in both the regular markets and the cryptocurrency world. But now, things might stay more steady, even if the Fed does something with interest rates, because we're not in that early, super-volatile phase anymore.

Expect the Fed to keep interest rates stable between 5.25% to 5.5% on Wednesday, with almost a 100% chance of no surprises, according to rate traders.

According to Greg Magadini at Amberdata, the Fed will likely keep interest rates unchanged this week, signaling they'll stay high for a while. This means the Fed meeting might not shake things up much in the financial world, making it a low-volatility event. The Fed's keeping an eye on inflation and jobs, and if they hint at making it easier to borrow money, it could cause confusion in the markets since they've been used to lower rates for a long time.

When it comes to the Federal Reserve and its upcoming decisions, it doesn't seem like they're going to surprise us with any big moves that would shake up the markets, whether it's Bitcoin or the regular financial markets.

A crypto trading firm in Singapore, QCP Capital, thinks that the Fed probably won't make any major changes in the near future. They're saying that in the last three meetings of the year, it's unlikely that the Fed will want to raise interest rates. But at the same time, they're also not sure if the Fed's leader, Powell, can say for sure that they're done raising rates, especially with gas prices going up and inflation starting to rise again. So, all in all, it looks like things will stay pretty steady for now.

The head of the Federal Reserve, Jerome Powell, is probably going to use vague language to try and keep the markets calm. That means the current market expectation of a small interest rate increase this year and then three rate cuts next year likely won't change much, according to QCP.

For Bitcoin, there are options expiring this Friday that are linked to decisions by both the Fed and the Bank of Japan. But these options suggest that those decisions might not cause any big waves in the market. Options are like bets on how much the price of Bitcoin will move, and right now, it looks like most people are betting it won't move much – only about 2.8% by this Friday. So, it seems like no one's expecting Chairman Powell to say anything that would shake things up.

⛏️ 470K BTC Transactions Stuck in Limbo

The Bitcoin network is kind of clogged up right now, like a busy road during rush hour. There are more than 470,000 transactions waiting to be processed, and that's causing some issues.

One of the effects of this traffic jam is that the fees you have to pay for sending Bitcoin are going up and down a bit. Right now, it's around $2.33 for an average transaction, which is a bit less than it was yesterday but still higher than a year ago when it was only around $1.05. So, it's gone up by about 10% in the past year.

This isn't the first time Bitcoin has had this problem. Back in May 2023, there was a similar situation, and the fees shot up dramatically. At one point, people were paying over $16 just to send Bitcoin, and it even hit $29 on May 9th. The main reason for that congestion was a bunch of new meme coins being created on the Bitcoin network.

So think of the Bitcoin Mempool like a waiting room for all the Bitcoin transactions. When you want to send Bitcoin to someone, your transaction goes into this waiting room.

Now, this waiting room is temporary, and it's like a checklist for the miners – the people who process and verify these transactions. They look at the waiting room and pick the transactions they want to include in the next block on the Bitcoin blockchain.

Here's the catch: they usually prioritize the transactions with higher fees because that's how they make money. So, if your transaction has a lower fee, it might have to wait in the waiting room for a bit longer, maybe even a few blocks, before it gets its turn to be processed and confirmed.

So, when the Bitcoin network gets really crowded, the miners – the folks who process transactions – like to work on the ones with bigger fees first. That means if you want your Bitcoin to move fast and get confirmed quickly, you might have to pay a higher fee, which can be more expensive.

But interestingly, even with all these transactions waiting around, the price of Bitcoin itself hasn't been affected much. Right now, it's trading at around $26,742, and it's not bouncing around too wildly according to CoinGecko.

⭐ Evening Star

The "evening star" is a pattern you might spot on a price chart, especially in financial markets like stocks or cryptocurrencies. It's made up of three candles in a row. First, there's a big green candle, indicating that prices have been rising. Next, there's a smaller, indecisive candle in the middle that doesn't have a clear color. Finally, there's a big red candle, suggesting prices are falling. What makes this pattern significant is that the last red candle closes below the middle point of the initial green one. When you see this pattern, it often serves as a warning sign, especially if it appears at the top of an uptrend. It suggests that the trend might be reversing, meaning prices could start going down after a period of going up. In simple terms, it's like a signal to be cautious about buying or holding that asset because a change in the trend might be on the horizon.