Bitcoin 'nuke' warning as Fed rate hike.



BTC's price has managed to cling on to $19,000 with a modest daily gain of 1.33% . Meanwhile, the U.S. dollar index (DXY), which measures the greenback's strength versus a pool of top foreign currencies, rose to 110.86, the highest level in 20 years.



The Federal Reserve is poised to discuss how far it could raise its benchmark lending rates to curb record inflation. Interestingly, the market expects the U.S. central bank to hike rates by 75 or 100 basis points (bps). The ramification of higher interest rates will likely result in a lower appetite for riskier assets like stocks and cryptocurrencies. Conversely, the U.S. dollar will serve as the go-to safe haven for investors escaping risk-on assets "There seems no reason for the Fed to soften the hawkishness shown at the recent Jackson Hole symposium, and a [0.75 percentage point] 'hawkish hike' should keep the dollar near its highs of the year," analysts at ING told the Financial Times.

Independent market analyst PostyXBT argues that a 100 bps rate can "nuke" Bitcoin below its current technical support of $18,800. He also suggests that BTC has a good chance of recovery if the rate hike turns out to be lower than expected, or 50 bps.
These speculations echo general rate hike expectations. John Kicklighter, the chief strategist at DailyFX, notes that a 50 bps rate hike would be bullish for the U.S. benchmark stock market index. Nonetheless, a 100 bps rate hike would be extremely bearish for the S&P 500. This could be equally problematic for Bitcoin, whose correlation with stocks has been consistently positive since December 2021.

The U.S. economy suffered two back-to-back quarters of negative growth. Moreover, its manufacturing PMI pointed to the slowest growth in factory activity since July 2020. Meanwhile, the two-year U.S.Treasury returns have crossed above the 10-year U.S. Treasury returns, plotting a yield curve.

Information source: https://cointelegraph.com/news/bitcoin-nuke-warning-as-fed-rate-hike-decision-looms-dollar-index-hits-20-year-high