Bitcoin price briefly loses $20,000 on ‘bunch of nothing’ Powell speech
Bitcoin (BTC) analysts were busy drawing new price targets on August 27 after the largest cryptocurrency briefly fell below $20,000.
Price target below $20,000 BTC remains in place
Data from Cointelegraph Markets Pro and TradingView showed that BTC/USD hit $19,945 on Bitstamp overnight after hawkish comments from the US Federal Reserve.
Intraday losses for the pair approached 9% and US stocks cratered on the outlook for inflation policy, which appears to be increasingly abandoning the “soft landing” narrative.
“Restoring price stability will take some time and will require vigorous use of our tools to bring demand and supply into better balance. Reducing inflation will likely require a sustained period of below-trend growth,” Fed Chairman Jerome Powell said in a speech at the annual Jackson Hole Economic Symposium.
“Furthermore, there will very likely be some softening of labor market conditions. While higher interest rates, lower growth and softer labor market conditions will bring down inflation, they will also cause some pain for households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability will mean far greater pain.”
By adding that quantitative tightening, known as QT, could remain “for a while,” Powell triggered a major volatility spike to the downside across risk assets.
Wasted 10 minutes of my life watching Powell say a bunch of nothing
— Will Clemente (@WClementeIII) 26 August 2022
As Cointelegraph reported, US stocks lost a combined $1.25 trillion in a single session – more than the entire crypto market cap.
Bitcoin managed to recover $20,000 on the day, hovering near $20,200 at the time of writing, but still near one-month lows.
For traders, it was now a matter of a relief rush followed – potentially – by even bigger losses.
“$BTC went lower than expected, but the idea remains the same. First up to liquidate late shorts, then down,” popular Crypto Twitter account Il Capo told followers in the first of several updates of the day.
Still, Il Capo of Crypto painted short-term relief targets between $23,000 and $23,500, but to the downside, $19,000 and $16,000 were now in play.
$BTC main idea
Resistances: 22500 and 23000. Expect a bounce to one of these levels for a short squeeze. It would also trap longs again, as it would be an aggressive move.
Support: $19k. Break below here and it goes straight to new lows.
Main goal: $16k pic.twitter.com/wFbVvBmHYO
— il Capo Of Crypto (@CryptoCapo_) 27 August 2022
Others saw the potential for increasing BTC accumulation if $20,000 is breached as support again.
Joint account TraderSZ considered $19,400 a potential bounce zone during such a correction, with relief running to the weekly open near $23,000 before June’s $17,600 re-entered the picture.
Meanwhile, the key trend lines of previous bull markets were now back overhead for BTC/USD. These included the realized price of $21,600 and the 200-week moving average (MA) near $23,000.
“Moving higher resistance at $21,100. Support at $19,850 followed by $19,200,” trading suite Decentrader added in part a summary of the current scenario.
DXY wakes up at last minute on Fed signals
As stocks fell, the familiar face of the US dollar came back to haunt the crypto markets.
Related: CME Bitcoin Futures See Record Discount Amid ‘Very Bearish Sentiment’
The US Dollar Index (DXY), which had initially suffered major declines, returned to levels that once again placed it within striking range of twenty-year highs.
At the end of August 26, the DXY was hovering around just under 108.9, up from a low of 107.6 within a few hours.
“FED holding course means $DXY is uptrending, meaning assets are going down more,” analyst Kevin Svenson in summary.
Meanwhile, investor and entrepreneur Danny Baldus-Strauss pointed Twitter followers to the inverse correlation between DXY and BTC as an ongoing top and bottom indicator.
“If you’re collecting Bitcoin in this bear, keep an eye on $DXY. All major lows in $BTC have coincided with local highs in $DXY,” he noted next to a chart from the trading platform Stockmoney Lizards.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
