Bitcoin price ready for another upswing as the Fed publishes new preconditions for a digital dollar

• The Fed will be looking for stakeholder interest and buy-in to support the launch of a CBDC.
• The US is still a long way to develop a digital dollar because many structures are not yet in place.
• Bitcoin is holding above $50,000 and looking forward to a rally to $60,000 if the 100 SMA resistance is broken.

On Wednesday, the Federal Reserve released a document that outlined new preconditions for the launch of a central bank digital currency (CBDC). Several people were listed as authors of the paper, including Jess Cheng, Paul Wong, and Angela Lawson.

The Fed to focus on clear policy objective before the launch

The United States Federal Reserve is likely to be looking for broader stakeholder support before coming up with a digital currency. Besides, the authors listed factors such as clear policy objectives, a strong legal framework, and market readiness. The CBDC must also be backed by robust technology to lay the groundwork for a “general purpose” digital currency in the US.

The trio’s opinions are in sync with the Fed chair Jerome Powell’s idea to “engage with the public pretty actively.” Moreover, they stressed that these “elements are not exhaustive because many systems, tools, processes, and structures will need to be in place for a CBDC.” In other words, this paper is not the Holy Grail for the issuance of a digital dollar, but it provides a framework for discussions. The authors state that:

“For example, engaging with a broad array of stakeholders and monitoring market readiness could inform clear policy objectives and vice versa. This paper does not attempt to prescribe how to address these preconditions; it aims to spark further inquiry.”

Intriguingly, the new paper says that a digital dollar will need a certain degree of buy-in in stakeholder participation. Public and private partnerships will be considered, especially for companies such as PayPal and MasterCard. Nonetheless, the authors reckoned that the Fed is still a long way to go in deciding how to approach the matter because “Issuing a CBDC in the United States would not be an easy task.”

Bitcoin settles above $50,000 ahead of breakout to $60,000

Bitcoin is holding firmly to the support at around $50,000 after the upswing from $45,000. The immediate downside is anchored by the 100 Simple Moving Average (SMA) on the 4-hour chart. At the time of writing, BTC is trading at $50,400 amid the push to the next hurdle at $52,500, highlighted by the 100 SMA.

The bullish scenario has been validated by the Moving Average Convergence Divergence (MACD) on the 4-hour chart. Notably, the MACD line (blue) crosses above the signal line, hence adding credence to the bullish picture. A break above the 100 SMA would trigger more buy orders as bulls anticipate liftoff to $60,000.

BTC/USD 4-hour chart

Looking at the other side of the fence

It is worth keeping in mind that a correction from the current price levels will come into the picture if Bitcoin loses the support at $50,000, highlighted by the 50 SMA. A bearish leg may ensue, pushing the bellwether cryptocurrency to the next support at $47,500 and $45,000, respectively.