- Federal Reserve will provide more guidance for Bitcoin and Ethereum in June 2023.
- A rate hike pause is likely in the event of lower inflation data.
- Bitcoin could rally to $30,000. Ethereum to $2,000.
YEREVAN (CoinChapter.com) — In May, Bitcoin (BTC) and Ethereum (ETH) investors remained jittered amid the US debt ceiling drama while coming out of the hangover of the banking crisis. Meanwhile, they appeared focused on the prospects of the Federal Reserve pausing its interest rate hikes.
The uncertainty affected Bitcoin (BTC), which fell nearly 7% to close May at $27,200. On the other hand, the price of Ethereum was little changed; it rose by about 0.25% to $1,875 per token.
On June 2, the US Senate passed legislation to suspend the debt ceiling and restrict government spending, thus averting the potential default scenario that had investors run toward widely perceived “safe haven” assets like the US dollar.
The US dollar index (DXY), a barometer to measure the greenback’s strength versus a basket of top foreign currencies, has fallen more than 1% from its local top — amid the debt ceiling drama. On the other hand, Bitcoin responded positively to the June 2 news, rising nearly 1.5% to around $27,200.
On the same day, Ether rose 2% to approximately $1,900.
A $1T Liquidity Drain Can Collapse Risk Markets by Q3
The crypto market’s upside sentiment is typically due to a popular narrative that presents the rise in the debt ceiling as equivalent to printing dollars. In other words, the US government can issue new bonds to raise capital, forcing the Fed to buy them if the private markets’ interest comes lower than anticipated.
However, the US central bank has pursued a quantitative tightening policy for months. As a result, it has reduced its balance sheet by $580 billion from its historical peak in April 2022.
Theoretically, the tightening leaves the market with fewer dollars than earlier, thus reducing investors’ appetite for riskier assets like Bitcoin and Ethereum in June 2023.
In addition, liquidity issues can escalate if the US government finds buyers for its newly-issued bonds, argues Ari Bergmann, the founder of risk management firm Penso Advisors. He told Bloomberg that a debt deal would likely drain markets off $1 trillion by the end of Q3/2023.
“This is not something that’s very obvious, but it’s something that’s very real. And we’ve seen before that such a drop in liquidity really does negatively affect risk markets, such as equities and credit.”
Excerpts from Bergmann’s statement.
Bitcoin, Ethereum Price Forecast June 2023
The headline that could influence Bitcoin and Ethereum price trends in June 2023 is the Federal Reserve’s rate hike pause.
That is primarily because of the inflation cooling down to 4.9% year-over-year in April 2023 from its last year’s peak of 9.1%. However, it is still far from the Fed’s preferred target of 2%, with Fed Chairman Jerome Powell confessing that they have become cautious about raising rates too much amid the banking crisis fears.
“So, as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals.”
Powell said in May.
The next inflation data will release on May 13. If consumer prices rise, there is a strong possibility of the Fed continuing its rate hikes. Else, the markets can expect a pause. As a result, Bitcoin and Ethereum can trade cautiously in the first half of June 2023.
For instance, Bitcoin could continue trading inside the range defined by its short-term ascending trendline support and the horizontal trendline resistance near $27,500, as shown below.
Similarly, the Ethereum price can fluctuate between its ascending trendline support and horizontal trendline resistance near $1,900 — at least in the first half of June 2023.
Afterward, investors can expect Bitcoin and Ethereum to pursue a strong trend, depending on the Fed’s rate decision.
So, a pause may allow Bitcoin in June 2023 to cross above $27,500 and eye a run-up toward $30,000. Conversely, a rate hike risks pushing the BTC price below its ascending trendline support — toward $25,000.
Related: 3 Reasons Why Bitcoin Price May Not Retest $30K in 2023
Similarly, the Ethereum price in June 2023 could rise toward the $2,000-2,100 range if the Fed pause rate. Else, its likelihood of dropping toward $1,800, a short-term support line, will be high.
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