Crypto Market to Rally? Bernstein Sees a Dovish Fed Stance

The crypto market has remained relatively stable this week despite some potential risks. That includes Strategy’s Bitcoin sales and the ongoing escalation between the US and Iran.

Bitcoin was trading at $62,750, while Ethereum has remained above the support of $1,700. This article explores whether crypto prices will rally as Bernstein sees a dovish Fed stance later this year.

Crypto Market to do well? Bernstein Expects the Fed to Embrace a Dovish Tone

Analysts at Bernstein believe that the Federal Reserve will embrace a dovish tone this year. In a note, the bank predicted that the Fed may avoid highly aggressive Rate hikes. It’s a move that may boost gold prices. If this happens, Bitcoin and the crypto market are likely to do well.

The statement came a day after the Federal Reserve published minutes of the last meeting. These minutes showed that the bank’s officials were divided regarding the path forward.

Some officials believe that the Fed should hike interest rates later this year if inflation remains above 2%. Others believe that the bank should leave them unchanged or even cut them if inflation falls.

Crude Oil Price is Rising

There were signs that inflation was going downwards as crude oil prices dropped amid the US and Iran ceasefire. Now, however, there is a risk that inflation will remain sticky for a while.

For one, the situation in the Middle East has escalated, with the US and Iran launching strikes and counterstrikes. As a result, Brent and West Texas Intermediate (WTI) jumped to $79 and $75, respectively.

In a statement on Wednesday in Turkey, Trump announced that, in his view, the ceasefire was over. If the war restarts, there is a risk that energy prices will surge since crude oil inventories have continued falling.

Soaring crude oil prices would push consumer inflation higher, making it harder for the Fed to cut interest rates. At the same time, service inflation has been relatively sticky in the past few months.

As such, as Bernstein warned, elevated inflation may force higher rates and hurt gold prices. Such a move would hurt Bitcoin and the crypto market. Traders on Polymarket have taken an opposite view from Bernstein. A poll shows the odds of a hike have continued rising and are at 53%.

Crypto Market Faces More Risks Ahead

Bitcoin and the broader crypto market face some major risks this year. For example, Michael Saylor’s Strategy has started selling its Bitcoin holdings. It has already sold coins worth over $200 million and is in the process of dumping much more over time.

This is a big story since Strategy was the biggest Bitcoin buyer in the world. It has accumulated over 800K coins over time. Now, with Saylor selling, there is a risk that other Bitcoin treasury companies will also do the same. It’s a move that will put pressure on the coin.

At the same time, demand for Bitcoin ETFs remains weak. While BTC ETFs added assets for three consecutive days, they lost over $84 million on Thursday this week. More outflows will likely put more pressure on BTC.

Bitcoin Price Technicals Suggest the Downside Still Intact

Meanwhile, technical analysis points to more downside in the near term. On the daily chart, it has remained below the descending trendline that connects the highest swing since May last year. It has also failed to move below the 50-day moving average.

The Relative Strength Index (RSI) has dropped below the neutral point of 50. Therefore, there is a likelihood that Bitcoin will retreat further, potentially to the year-to-date low of $58,000. If this happens, the crypto market will likely remain under pressure.