Powell's Hawkish Stance Halts Bitcoin's Recovery at $98,000

Bitcoin's early week recovery was halted at $98,000 and subsequently fell to $95,000 following Fed Chair Jerome Powell's hawkish outlook on interest rate cuts. During his semi-annual monetary report to the U.S. Congress on February 12, Powell emphasized that the agency was not 'in a hurry to change its policy stance.' He stated, 'Our policy stance is now less restrictive than it had been, and the economy remains strong. We do not need to be in a hurry to adjust our policy stance.'

A lower interest rate typically means cheaper capital, which is bullish for risk-on assets like Bitcoin and stocks. However, after a hawkish hold in last month's FOMC meeting, the slow Fed rate cut outlook and Trump's tariffs have heightened bearish sentiment. The markets will now shift their focus to key inflation data, specifically the January CPI (Consumer Price Index) report scheduled for February 12.

According to data tracked by Forex Factory, the forecasted target for monthly change for last month's CPI is 0.3%. If the actual CPI is higher, it could be considered bearish as it would prompt the Fed to keep the interest rate unchanged for longer. However, a lower CPI print could slightly boost the market and odds of a rate cut. Interest traders were pricing a 95% chance of another rate pause, like in January, during the next FOMC meeting in mid-March.

The Coinbase Premium Index, which tracks U.S. investors' appetite for the king coin and positively correlates with BTC price action, has returned to a neutral level after a surge in early February. Similarly, BTC retraced from $101,000 to $95,000 over the same period. Any further dip in the Coinbase Premium Index to negative territory could limit BTC's short-term rebound, despite the pending supply shock as the OTC balance shrinks.

The cryptocurrency's choppy market could persist according to the Coinglass liquidation heatmap. Pockets of liquidity (bright levels) are on either side of price action, suggesting that BTC could continue fluctuating between $94,000 and $100,000 in the short term.