Rate hikes on the horizon, will it doom Bitcoin below $20,000?
Bitcoin continues to trade sideways as volatility in the market’s most prominent cryptocurrency eases. Bitcoin has successfully held the $22,000 support level, although it had a drop below $22,000 that was quickly bought by the bulls.
Volatility in the cryptocurrency market has been bad in recent weeks. BTC’s short-term implied volatility (IV) has recently fallen below 40% and trading volume has hit new lows. This indicates that BTC has entered an “extremely tight liquidity phase,” according to a Twitter mail by market researcher and data analyst WuBlockchain.
In addition, Bitcoin liquidations in the past 24 hours topped $70 million as the flagship crypto asset fell below $20,000, wiping out the liquidity of long positions on the exchange’s order books, according to Glassnode data.
More Hawkish Politics Will Delay BTC’s Bull Market?
With the recent statements of Federal Reserve (Fed) Chairman Jerome Powell, the crypto market fears further increase as there is potential for additional interest rates to control the level of inflation. This rise in rates is likely to affect the price of the top cryptocurrencies on the market and cause a further decline in the overall crypto market cap, which is currently below the trillion-dollar level.
In accordance with the mandate of the financial institution, Jerome Powell has stated that they will continue to “use tools to reduce inflation over time” to reduce the inflation numbers to 2%.
Historically, when the Fed introduced restrictive monetary policy that led to higher interest rates, stocks and cryptocurrencies recorded losses; higher interest rates generally affected investors’ appetite to dive into the cryptocurrency market. Powell added:
The latest economic data has come in stronger than expected, suggesting that the final level of interest rates is likely to be higher than previously thought. If the totality of the data should indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes
Michael Van de Poppe, CEO and founder of trading platform Eight Global, addressed the latest comments from Fed Chairman Jerome Powell, who says selling has increased for risk assets in anticipation of higher interest rates and a faster pace to control inflation, based on the latest news and the “likelihood” of a 50 basis point (bps) rate hike the coming months.
Critical area for Bitcoin
As Bitcoin tests the $22,000 liquidity of long positions, more than 5,000 BTC have left exchanges in the past 24 hours, according to on-chain data analysis firm CryptoQuant, which also tired that the crypto market is primarily bearish.
The increase in BTC outflows from exchanges could support bullish investors. The less BTC available in the market, the more likely it is to hold above critical support.
Bitcoin is trading above the $22,300 support line, down -1.3% in the last 24 hours. In the broader time frames, BTC has fallen significantly in the seven and fourteen day time frames, posting retracements of -5.5% and 10% respectively. If Bitcoin fails to hold above its nearest support, it looks set to visit the lower $21,000 and $20,000 levels.
Featured image from Unsplash, chart from TradingView.com
