The world’s largest cryptocurrency, Bitcoin, has been trading in a bearish market as the broad-based US dollar maintains strong positive traction. Bitcoin is down almost 6% in the last 24 hours and more than 8% in the previous seven days and appears to be losing value among investors for a variety of reasons.
Hawkish Fed policy and higher Fed Fund rate trigger risk aversion
A bearish trend in bitcoin price could be attributed to the development of the American stock market, which has been affected by fears that the Federal Reserve will continue to hike interest rates. This is leading to “risk aversion” as investors siphon off funds from riskier assets like stocks and bitcoin. Both the NASDAQ 100 and S&P 500 fell on the strength of the dollar, putting bearish pressure on Bitcoin.
Additionally, Russia’s shutdown of the Nord Stream 1 pipeline aided the fall in bitcoin price, halting the flow of gas to Europe and spooking markets. Rising bond yields have also been key in keeping BTC prices under pressure. If such patterns continue, Bitcoin (BTC) coin price growth could be significantly down in the year ahead.
Bond yields rise higher
As stronger-than-expected US manufacturing statistics fuel concerns that central banks will have to raise interest rates quickly to curb inflation, the bond market sell-off shows no sign of abating.
In a move not seen since mid-June, US 10-year bond yields rose 6.1 basis points to 3.25 percent. As a result, investors prefer to invest in risk-free assets, which is putting pressure on the Bitcoin price.
Stronger dollar in the game
The broad-based US dollar has turned green and has made a fresh 20-year high. However, the reason could be attributed to the Fed’s strong expectation of adopting an aggressive stance, which supported the value of the 10-year US Treasury Bills.
The price of bitcoin, which has a strong inverse relationship with tech stocks and the tech-based NASDAQ, has also fallen. According to a Bloomberg article, the Fed’s aggressive moves could become much more forceful. Fed Chair Jerome Powell appears to be following in the footsteps of the late Paul Volcker. Volcker’s hawkish stance on inflation has most likely plunged the US economy into a slump.
If the Fed continues quantitative tightening, the broad-based US dollar could gain traction and reach new highs. In his Jackson Hole speech, Powell reiterated his desire to strengthen the dollar to fight inflation.
If bitcoin prices keep falling, they may reach unsatisfactory levels. Richard Heart, a major crypto influencer, predicts that Bitcoin will fall to $11,000 before rallying. At the time, investor attention was focused on the September 13 release of the CPI data.
Bitcoin price chart – Source: Tradingview
Bitcoin Price Prediction: Can BTC Test 17,600?
The leading cryptocurrency pair BTC/USD is in a bearish trajectory falling from $20,000 to $18,750. On the daily timeframe, BTC/USD breached the threefold lower support level of $19,053. The close of the bearish engulfing candle below the $19,053 level could potentially fuel further bearish trends in Bitcoin.
As we can see, the BTC/USD pair violated a symmetrical triangle pattern on the downside, signaling a strong selling bias among investors. On the downside, immediate support for the BTC/USD pair prevails at the $17,685 level and a break above this level could open further scope for selling down to the $16,450 level.
Can BTC reclaim $20,000?
It will likely be a challenge for BTC to reclaim $20,000 unless it breaks the $19,500 resistance level. A surge in bitcoin demand can break $19,500 and BTC price can surge towards the $21,900 or $22,425 resistance levels.
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