Bitcoin and crypto markets in general had a volatile but bullish week as the crucial Fed meeting on Wednesday provided investors with a renewed outlook on the monetary tightening path and broader economic conditions. Even though the turmoil in the banking sector seems to be subsiding and regulators continue to tighten their grip on cryptocurrencies, the digital asset sector remains more than resilient. Is this the beginning of a new bull market?

Mixed signals from Fed

During the past week, cryptocurrency prices experienced significant swings as market participants were anticipating the outcome of the Fed’s policy meeting on Wednesday. Bitcoin rallied ahead of the Fed decision, posting a new nine-month high just shy of the $29,000 mark, while the famous Crypto Fear & Greed Index recorded a fresh 16-month peak of 68. This rally set the stage for a disappointment, which materialized after the Fed hiked its base interest rate by 25 basis points.

Although this was in line with market expectations and Jerome Powell’s speech tilted to the dovish side, investors focused on comments concerning the recent risks within the banking sector, which according to the Fed are likely to result in tighter credit conditions and weigh on economic activity. Moreover, statements from Treasury Secretary Janet Yellen that the US government is not considering expanding the FDIC's insurance limit of $250,000 added more pressures on risky assets. Early on Friday, cryptocurrency traders pushed digital asset prices higher to recoup recent losses, shrugging off macroeconomic and systemic concerns and promoting the resiliency of the 2023 rally.

Turbulence in banking sector but what about cryptos?

The cryptocurrency space has capitalized on the uncertainty surrounding the banking sector following recent bank failures but it does not fare any better. Last year was characterized by a domino of collapses of crypto-related firms, which seem to be resuming in 2023. In the latest episode, Coinbase shares plummeted after filings revealed that a serious regulatory enforcement action by the SEC was pending.

Regulators are closely scrutinising the firms’ ‘staking’ service as well as other business lines that are detrimental sources of revenue. As uncertainty over the firm’s operations increase, the market could suffer another liquidity crunch and a loss of credibility, which could lead to losses for crypto assets. Meanwhile, on Friday, Binance temporarily suspended spot trading and halted deposits and withdrawals after suffering some technical glitches with its platform.

Building a base for a stronger rally?

Taking a technical look, BTCUSD seems to be experiencing a consolidation phase after posting a fresh nine-month high on Wednesday. Are we heading for a reversal or is this just a pause ahead of an explosion to the upside?

If buying pressures persist, the price could test the recent nine-month high of $28,917 before the spotlight turns to the May 2022 resistance zone of $32,380.

Alternatively, the recent support region of $26,688 could curb initial declines. A violation of that zone might trigger a test of the $25,250 hurdle.