Is Bitcoin on its way to further pain after repeatedly falling towards $ 20,000?
Bitcoin has encountered significant volatility in the past, falling more than 70% from its all-time high. … [+]
Bitcoin prices have been a bit turbulent in the past, and have repeatedly approached $ 20,000 and fallen to some of the lowest values since the end of 2020.
The digital currency fell to $ 20,079.72 yesterday morning, TradingView figures show, the lowest since December 2020.
The cryptocurrency then returned, exceeding $ 21,700 yesterday afternoon, additional TradingView data reveals.
Today, bitcoin prices took a new step towards $ 20,000, falling below $ 20,300.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Fed interest rate increase
The digital currency made this latest attempt at the $ 20,000 level shortly after the Federal Open Market Committee issued a statement revealing that it raised the target for the federal funds rate to between 1.5% and 1.75%.
This announcement confirmed the expectation, held by many, that the FOMC would in fact raise its reference rate by 75 basis points, the largest increase since 1994.
This development does not bode well for risk assets, as an increase in the federal funds interest rate puts upward pressure on broader interest rates, which in turn leads to bonds providing more convincing returns.
Since market participants can achieve greater rewards by putting their money in low-risk investments, they have less incentive to choose risk assets. This in turn can put downward pressure on the prices of assets such as cryptocurrencies and stocks.
Following this recent development, experts are shedding some light on what bitcoin prices can do next.
Important technical levels
Several market observers pointed to the $ 20,000 price level, highlighted its importance and stressed that bitcoin has failed to break through the support there.
“BTC’s hard hit of $ 20k clearly illustrates the strong psychological support of $ 20k – both because it was previously ATH (all-time high) and because it is a nice round number,” said analyst Tim Enneking.
“Interestingly enough, when BTC has set a new ATH (in this case about $ 70k), it has never taken out the previous ATH. Falling below $ 20,000 will therefore be the first,” says Enneking, CEO of Digital Capital Management and co-founder and managing partner of the finance company Psalion.
“My best guess is that BTC will fall below $ 20k, but not for long and not very far,” he added.
Richard Usher, head of OTC Trading at BCB Group, also weighed in on this important psychological level, stating that “a rapid run below 20,000 is almost inevitable” due to the FOMC’s rate hike and press conference.
He gave some insight into what the cryptocurrency can do after falling below the $ 20,000 limit.
“I think a stop loss run will clear some short-term positions out of the market, and I think a move below $ 20,000 will be short-lived. I think we will try to establish a low level around $ 17,500 / $ 18,000 before we get back. ”
Joe DiPasquale, CEO of the hedge fund manager for cryptocurrency BitBull Capital, pointed to a similar level of support, highlighting $ 17,000 as “important”. He noted that if bitcoin broke through support there, $ 13,000 would be the next key level.
Usher and DiPasquale also highlighted important levels of resistance, with the former stating that “a $ 23,000 downturn should confirm that a short-term low is in place” and the latter indicating that “on the upside, $ 25,000 is the first step towards some real reversal. ”
Bitcoin outlook uncertain
Several analysts stressed that due to variables such as macroeconomic uncertainty and bitcoin’s high correlation with equities, the digital currency’s future prospects are unclear.
“This is the first time in crypto history that it is experiencing a bear market along with the global economy,” said Jesse Proudman, VP Crypto Investing for Betterment.
“This is exacerbated by systematic headwinds as significant influence is dissipated from the system,” he added.
“Exactly where we are in that relaxation is the critical question and will probably dictate which way the price moves.”
Collin Plume, CEO and founder of My Digital Money, also took a look.
“I believe that digital currency has not yet bottomed out, and it is both a function of fear and uncertainty caused by our economic crash in epic proportions and cunning and hopeful desire to buy low,” he said.
Plume stated that “crypto-investors are beginning to take cover” by flocking to “tangible” assets such as “cash and precious metals.”
He noted that many crypto-investors sell their digital currencies, even though they have to incur a loss to do so.
“Pair it with crypto-prophets who declare that Bitcoin will go below $ 10K, and you have a market that is both cautious and hopeful,” Plume said.
“They do not see the harm in going away from the crypto market right now, since it is going to go down anyway. They can only keep their tangible assets and when things get better, crypto bottom out and they can buy in again for optimal gains,” he remarked.
“It’s a self-fulfilling prophecy,” Plume concluded.
Enneking also commented on bitcoin’s future market prospects.
The biggest problem is how long it will take before a truly meaningful recovery. Given the challenges of the fiat macroeconomic world, which now affects crypto so strongly due to the “daylight correlation” between stocks (especially US stocks) and cryptocurrencies ( especially BTC), it may take a while before BTC recovers significantly. ”
Veteran investors are not deterred, says analyst
Regardless of how the markets have performed in the past, veteran crypto investors are untouched, claimed Konstantin Boyko-Romanovsky, founder and CEO of Allnodes Inc.
“There are different types of crypto traders; believers in Blockchain technology and its value and those who invest in the prices of cryptocurrencies, “he said.
“These newcomers joined the last cryptocurrency race in the hope of getting rich quick. These are the same people who are pulling out of the cryptocurrency market right now, affected by the Fed’s rate hikes, rising inflation and potential cryptocurrency adjustments.”
“The devotees, on the other hand, are going nowhere,” the analyst said.
“They rebalance their crypto portfolios, engage more deeply, do more research, wait for it or come in at lucrative prices.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS
