Over the past three weeks, there has been a significant redistribution of investment volumes ahead of the Fed meeting. The cryptocurrency market and bitcoin in particular have lost some investment capital during this period. Only 24.53% of investors hold BTC for at least six months, a record low. Moreover, capital outflows from cryptocurrency funds totaled $110 million during the last week.
In other words, bitcoin was considerably weakened ahead of the key Fed meeting. The main investment focus is still placed on precious metals and stablecoins. There has also been a marked increase in bitcoin volatility, triggered by the overall market situation as well as a rise in the number of short-term investors. Bitcoin's bullish momentum is significantly limited due to increased volatility and gradual recovery of losses by short-term investors.
However, BTC buying activity has increased. According to Glassnode, the largest trading volume is registered around $39,000. This fact indicates that cryptocurrency buyers have become active. It is assumed that the preceding pre-stablecoin buying cycle was the main reason for it.
Moreover, there was the largest outflow of BTC coins from cryptocurrency exchanges last week. More than 30,000 BTC were withdrawn from one of US major cryptocurrency exchanges. This fact indicates that institutional investors began to accumulate bitcoin en masse ahead of the Fed meeting. It may also be related to an executive order signed by US President Joe Biden to develop a legal framework to regulate digital assets. The combination of these factors suggests that large companies began to consider bitcoin as an alternative to gold.
The Fed was expected to raise its key interest rate by 0.25% at yesterday's meeting. Taking into account massive outflows of capital, the stock and cryptocurrency markets are poised to monetary policy tightening. However, the last meeting of the committee took place before Russia's military invasion of Ukraine. It was not clear whether the interest rate would increase by only 0.25% at the end of yesterday's meeting regarding the subsequent sanctions and increased macroeconomic instability .
Technically, bitcoin was extremely volatile ahead of the Fed meeting. The asset tried to reach the level of $42,000. However, it formed a long upper wick due to sellers' pressure and dropped to $40,400. This is a clear signal of weak investor purchasing power. Before a major economic event, most market players were not active or accumulated BTC coins. A triangle pattern was finally formed on the charts. Bitcoin was likely to break the narrowing range yesterday. In case of a downside breakout, which was the main option for the price, the key support zone would be at $32,400. If bitcoin managed to perform a bullish breakout, the price would have hit the local high around the range of $44,000-$45,600.