Despite Bitcoin’s recent rebound to the critical level of $26,100, which indicates a pivotal juncture for its future upward momentum and acts as a barrier against further declines, there are concerning indicators that may give pause to Bitcoin enthusiasts in the short term.
The convergence of these factors creates a potential recipe for a market correction.
One contributing factor is the unexpectedly high U.S. headline inflation rate for August, which stood at 3.7%, up from the previous month’s 3.2%. While not a game-changing development, it suggests that the likelihood of another interest rate hike has marginally increased, now reaching 53%. This point is underscored by Jeroen Blokland, a diversified asset investor.
Furthermore, according to Mike McGlone, a senior macro strategist at Bloomberg, there are indications that Bitcoin might be at the forefront of a downward trend. McGlone underscores that Bitcoin stands out as an “extremely liquid” asset that has seen substantial appreciation without being linked to particular projects or obligations.
Nevertheless, considering its emergence during a time of historically low interest rates, its potential as a leading candidate for a market reversal is worth noting.
The surge in US inflation figures and the increasing interest rates present hurdles for the Bitcoin bull run.
An important signal pointed out by McGlone is the downturn of Bitcoin’s 20-week moving average (MA), a trend that carries implications for all types of risky assets.
Given Bitcoin’s remarkable historical performance, this decline in its value holds notable significance. McGlone’s analysis further unveils that federal funds futures for the upcoming year are hovering above 5%, suggesting restrained expectations for liquidity from the Federal Reserve (Fed).
A comparable pattern emerged in the case of Bitcoin’s mean reversion at the outset of 2022, coinciding with the initiation of futures pricing for the ongoing tightening cycle.
As the lower limit of the federal funds rate rapidly ascends from zero to 5.2% with expectations of further increases, the prospect of considerable strain on all risk assets, including Bitcoin, looms large.
Furthermore, McGlone underscores the historical interconnection between Bitcoin and the broader market. Following the infusion of liquidity due to the shift to zero interest rates in early 2020, Bitcoin’s 20-week moving average hit its lowest point before a similar trend was observed in the S&P 500 during the third quarter of that year.
Mike McGlone’s analysis raises apprehensions about Bitcoin’s future performance in the midst of evolving interest rate dynamics and its potential impact on all risk assets. As Bitcoin’s 20-week moving average exhibits signs of a downturn, investors and market participants will vigilantly monitor its price trajectory and its resilience in the face of mounting interest rate pressures.
Bitcoin’s Struggle Against Resistance: Will It Break Through or Plummet to a Seven-Month Low?
As of the present moment, Bitcoin (BTC), the dominant cryptocurrency in the market, is grappling with a formidable resistance barrier at $26,400, as highlighted by reports from NewsBTC.
Over the past 24 hours, BTC has managed to eke out a modest 0.3% gain, with the most notable progress occurring in the last seven days, where it saw a slight uptick of 1.9%.
Should BTC succeed in surmounting its immediate resistance, it will face the daunting challenges of the 200-day and 50-day moving averages (MA) positioned at $27,000 and $27,100, respectively. These levels present substantial obstacles to the cryptocurrency’s aspirations and its potential for future growth.
Conversely, in the event of an extended decline resulting in the forfeiture of its current marginal gains, Bitcoin enthusiasts must vigilantly observe the critical threshold at the $25,150 mark.
A breach of this threshold could potentially plunge BTC to a seven-month nadir of $22,000, endangering both the cryptocurrency’s bullish trajectory and the gains amassed since the year’s commencement.