Yesterday’s interest rate decision by the U.S. Federal Reserve (Fed) and the subsequent press conference by chairman Jerome Powell were met with a very bearish reaction from traditional financial markets, as well as Bitcoin and crypto. The Bitcoin price briefly touched $29,000 before falling as low as $26,600.

However, the question arises, what has changed about the bull case for Bitcoin anyway? The US banking sector continues to face unresolved issues, while Fed chairman Powell and US Treasury secretary Janet Yellen sent conflicting signals.

Bitcoin Waits For Next Bank Bailout

The Fed voted unanimously to raise the federal funds rate by 25 basis points (bps). Not a single voting member of the Fed wanted to pause or cut rates. During the press conference, Powell stressed that further increases “may be appropriate” and would be decided “meeting by meeting” based on available data. Despite a collapse of the regional banking system, he said the Fed is not worried – but these comments do not reflect reality. Just two weeks ago, the Fed was convinced that interest rates needed to rise faster. The base case was a 50 basis point rate hike. If the banking system is as “sound” as the Fed claims, why didn’t it raise by 50 basis points? Because, as he noted also, the current banking crisis corresponds to an increase in interest rates due to the credit crunch. It is also interesting that Powell and Yellen spoke at exactly the same time. While the Fed was raising rates, Yellen said that the Federal Deposit Insurance Corporation (FDIC) will not guarantee all deposits, whereas the day before she had said she would consider guaranteeing all deposits. The Fed and the US government seemingly want an image that shows that the crisis is under control. In reality, they have not yet found a solution for the banks. Meanwhile, Powell sent mixed signals, saying the Fed is determined to support the banks but does not expect any rate cuts this year. Bill Ackman, founder and CEO of Pershing Square Capital Management, this mess on Twitter. Ackman criticized Yellen for withdrawing implicit support for small banks and depositors yesterday while also making clear that system-wide deposit insurance is not being considered.

We have gone from implicit support for depositors to Yellen explicit statement today that no guarantee is being considered with rates now being raised to 5%. 5% is a threshold that makes bank deposits that much less attractive. I would be surprised if deposit outflows don’t accelerate effectively immediately.

According to Ackman, a temporary system-wide deposit guarantee is necessary to stop the hemorrhaging of smaller banks. “The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back,” the renowned hedge fund manager said.

What Does This Mean For The BTC Price?

For the Bitcoin and crypto market, it is a matter of digesting the data today. Basically, though, it has come as expected, especially the Fed’s rhetoric, which has to guide market expectations. Meanwhile, market futures are forecasting rate cuts of 100 basis points by December, which would mean a total of four rate cuts from June. This is the Fed’s biggest divergence from the market ever. As analyst Michaël van de Poppe , Powell has done the obvious. “He needs to continue hiking the interest rates, while he’ll add more to the balance sheet to save banks. Bitcoin corrects and I think we’ll go down some more. It’s not a great recipe to go bullish into an FOMC event.” In light of the ongoing banking crisis, analyst “@tedtalksmacro” has a different recipe for Bitcoin’s success, “We need to wait for the next bank to blow up before we can get excited again,” “First interesting level to the downside for me is ~25k, otherwise a flip of 30k will grab my interest. Patience.” At press time, the Bitcoin price was at $27,586 after failing to break resistance at $27,700.