Signs of slowing price pressures in July were short-lived
Recent months have been challenging for the cryptocurrency market, with significant sell-offs driven by hawkish signals from central banks and the ongoing uncertainty surrounding the Ukraine conflict.
Bitcoin, along with other major cryptocurrencies, fell again this Tuesday following the news of higher-than-expected consumer price inflation for August. This fueled speculation that the Federal Reserve will take more aggressive steps at its September 20-21 meeting, potentially raising rates by 1% instead of the previously expected 0.75%. This could spell trouble for those holding long positions in BTC.
According to the Bureau of Labor Statistics, the consumer price index increased by 0.1% in August (contrary to the forecasted 0.1% decrease), following a flat reading in July, while core inflation accelerated more than expected. Year-on-year, the consumer price index rose 8.3%, above the anticipated 8.1%. Shelter, food, and medical care were the main contributors to this broad-based increase, and Morgan Stanley’s Chief US Economist, Ellen Zentner, commented:
“The August report clearly sends a hawkish message as the signs of decelerating price pressures in July proved to be short-lived. A 75 basis-point hike is likely for next week’s rate decision.”
No pause in the FED’s actions
Federal Reserve Chair Jerome Powell confirmed that the Federal Open Market Committee would continue its efforts to curb inflation, while St. Louis Federal Reserve President James Bullard suggested that he is open to another large interest-rate hike at the upcoming meeting.
Investors are concerned that an aggressive interest rate hike could trigger even more significant sell-offs, which may make it difficult for Bitcoin (BTC) to maintain levels above $20,000. It is essential to recognize that the cryptocurrency market closely mirrors the stock market, so any downward trends in equities are often reflected in the crypto market as well.
Analysts at Nomura Securities now predict that the Federal Reserve might implement a 100-basis point increase, with market sentiment remaining predominantly bearish throughout Q4.
Jeong Seok-moon, the head of South Korean exchange Korbit, speculated that the crypto winter might end before 2022 concludes. However, he also noted that the US Federal Reserve’s efforts to tackle inflation would likely continue to impact cryptocurrency markets in the near term.
Technische analyse van Bitcoin
After a recovery in July, Bitcoin’s price fell by roughly 15% in August. It is currently holding above the $20,000 support, but if it breaks this level, there is a possibility that it will test the $19,000 price point.
On the chart below, the trendline is marked. As long as Bitcoin’s price remains below this trendline, we cannot speak of a trend reversal, and BTC remains in the “SELL-ZONE.”
Key support and resistance levels for Bitcoin
On the provided chart (from January 2022), I have marked key support and resistance levels that can guide traders in predicting price movements. The more often the price tests these levels without breaking them, the stronger the support or resistance. If the price moves through resistance, that resistance level could become support. Bitcoin is currently in a “bearish phase,” but if it rises above $25,000, it may signal a trend reversal, with the next target around $27,000. The current support is at $20,000, and if the price drops below this, it would trigger a “SELL” signal, potentially leading to a move towards $19,000. If the price falls below $17,500, a stronger support zone, the next possible target could be around $15,000. If interest rates continue to rise and the economy enters a deeper recession, this could further affect Bitcoin’s price.
Factors supporting a rise in Bitcoin price
Bitcoin surged more than 25% from the beginning of July, reaching a high of $25,212 on August 15. Despite this sudden rise, Bitcoin struggled to stay above the $25,000 mark. Currently, Bitcoin is above the $20,000 support, but if it breaks this, the next level could be $19,000. Several surveys indicate that institutional investors remain bearish on Bitcoin, especially due to the Fed’s aggressive interest rate hikes, which could potentially lead to a larger sell-off. While Bitcoin is still in the “bearish phase,” a rise above $25,000 could signal a reversal, with a possible target near $27,000. It is essential to remember that Bitcoin’s price often follows trends in the US stock market. If equities experience an uptrend, the crypto market usually reflects the same trend.
Indicators pointing to further decline for Bitcoin
Bitcoin, like most other major cryptocurrencies, dropped again on Tuesday alongside equities following the US report indicating higher-than-expected consumer price inflation for August. If Bitcoin’s price falls below the $20,000 support, it could test the $19,000 level.
Bitcoin price forecasts from analysts and experts
Bitcoin and other major cryptocurrencies continued to decline this Tuesday after the US reported that consumer price inflation in August rose more than expected. According to the Bureau of Labor Statistics, the consumer price index increased by 0.1% in August, contrary to the expected 0.1% decrease. Morgan Stanley’s Chief US Economist, Ellen Zentner, commented that the signs of decelerating price pressures in July proved short-lived, and a 75-basis point rate hike is expected for the upcoming meeting. Investors are concerned that aggressive rate hikes may lead to further sell-offs, making it challenging for Bitcoin to stay above the $20,000 level. Analysts at Nomura Securities predict that the Fed might announce a 100-basis point increase, which could keep market sentiment overwhelmingly bearish in Q4.
