Bitcoin and Ethereum forecast for the week ahead

Bitcoin, Ethereum – Talking Points

• Bitcoin fails after breaking through 22k, fib support below
• Ethereum declines from the $1,800 level after the merger
• Traders look to next week’s FOMC meeting for macro clues

Bitcoin & Ethereum Outlook: Bearish

Bitcoin and Ethereum both took a deep dive this week as a warmer-than-expected US CPI reading weighed heavily on global risk assets. The crypto space currently faces a significant number of headwinds, from declining risk appetite to potential regulation from Washington. The Fed’s ambitious tightening campaign has dried up appetite for speculative assets, as the US central bank continues to battle historic inflation. Cryptocurrencies could come under renewed pressure as the Fed looks set to raise interest rates by another 75 basis points next week, leaving the door open for a potential 100 basis point hike.

For many crypto investors and traders, the focus was entirely on Ethereum this past week. The network completed its biggest ever upgrade, known simply as “the merger.” The merger is designed to cut the crypto’s energy usage by over 99%, with the first “proof of stake” transactions completed with an almost 100% client participation rate. The merger will also change the security protocol of the network while improving the verification process for transactions.

Bitcoin was particularly hard hit during last Tuesday’s session, dropping from $22,750 all the way to the key $20,400 level. In the wake of the repricing of Fed expectations, Bitcoin continued to fall as upside was capped by trendline resistance. The price has since fallen below the key $20,000 psychological mark, with fib support at $19,225 coming into view. There is a major support zone here around $19,000 that could boost prices until next week’s key FOMC meeting. At the moment, Bitcoin remains a barometer of risk, and investors continue to be reluctant to put money to work in speculative assets. I expect the trend to remain lower into the FOMC, with direction into next weekend depending on any surprises we may get in the dot plots or the press conference.

Bitcoin 1 hour chart

Chart created with TradingView

Ethereum was the focus of many this week following the completion of the “merger.” The event has played out as a “buy the rumor, sell the fact” event, with investors dumping ETHUSD following the completion of the upgrade. Tuesday’s CPI print saw prices cut through the support zone that had been carved out around $1,700, while further declines have taken the price back to a key support zone around $1,400. The rapid decline in Ethereum’s price encapsulates the risk to financial markets of late, as traders remain at the mercy of an aggressive Federal Reserve. With another significant rate hike set for next week, it could be a matter of time before Ethereum cuts through this current $1,400 support level. Should more downside occur, I would look to the $1250 area for initial support. Overhead resistance remains at $1,600.

Ethereum 1 hour chart

Chart created with TradingView

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— Written by Brendan Fagan

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