Bitcoin is a highly traded and favored asset in the realm of cryptocurrency. With the US Federal Reserve's Chairman, Jerome Powell, warning of an increase in interest rates, there are concerns amongst investors about whether this will lead to a drop in cryptocurrency prices.
On March 8th, Bitcoin's value plummeted to a three-week low due to robust US employment data, causing risk assets to become subdued. And now its value has a chance of breaking through its $22k support level while simultaneously experiencing a downturn against the booming DXY.
BTC/USD 1-day candle chart (Bitstamp). Source: TradingView
Employment Stats Boost Fed Hawks, BTC Price Dips
According to information obtained from Cointelegraph Markets Pro and TradingView, the BTC/USD pair experienced a decline and reached a low of around $21,800 on the Bitstamp exchange.
At the time of writing, traders were trying to maintain the $22,000 support level for the pair, and their potential downside targets were only expected to be reached once they reached around the $21,300 level.
Michaël van de Poppe, founder and CEO of trading firm Eight and a contributor to Cointelegraph, summarized that Bitcoin's recent performance had not demonstrated the strength he expected to see. He noted a slight rebound yesterday, but overall, the cryptocurrency's performance has been lackluster.
In light of this, van de Poppe is anticipating further downward momentum in Bitcoin's price, with the potential for it to reach a low of $21.2K before experiencing a rebound. He also believes that to aim for the $30K, it is crucial for the cryptocurrency to surpass the $23K level.
BTC/USD annotated chart. Source: Michaël van de Poppe/Twitter
On the other hand, Daan Crypto Trades, a trading account, stated that the recent volatility in Bitcoin's price results from movements in the Bitcoin futures markets.
On the same day, Daan Crypto Trades disclosed that there was a significant amount of buying interest in the Binance futures pair for Bitcoin, with a large number of buy orders waiting to be executed. Additionally, there has been a notable increase in Open Interest, which measures the total number of outstanding futures contracts.
It is important to note that buying or selling walls in the market can be misleading as they can be removed at any time. There is a sense that a significant market shift is imminent, regardless of whether it is an upward or downward movement. Meanwhile, the influence of macro events on the movement of cryptocurrency markets has been mixed.
Although Jerome Powell, the Chair of the Federal Reserve, made an appearance before the US Congress the previous day, it did not result in any significant reaction in the cryptocurrency markets. However, releasing job data on the same day caused a negative sentiment among traders, leading to a price decline.
In his comments regarding the non-farm employment increases of the day, van de Poppe noted that the forecasted number of employed people was 197K. Still, the actual number was 242K, which was more favorable than expected.
The recent employment figures have traditionally been unsettling for risk-on investors as they imply that the Federal Reserve has more flexibility to maintain tighter financial conditions for a more extended period of time. This sentiment is reinforced by Jerome Powell's recent statements about the possibility of increasing interest rates further in 2023, which could be better for investors looking for higher returns on their investments.
A Quick Fundamental Outlook on BTC Price
Bitcoin (BTC), which is currently the largest cryptocurrency in the world, has been struggling to make any gains, and its price has remained consistently low, around the $22,000 mark. The reason for this decline can be traced back to the remarks made by the Chair of the US Federal Reserve, Jerome Powell, about the possibility of interest rate hikes. It should be emphasized that the cryptocurrency market has witnessed a downturn in the wake of Powell's remarks and the ambiguity related to Silvergate Bank.
Apart from Powell's comments, the uncertainty surrounding Silvergate Bank has also played a role in the decline of the cryptocurrency market. As a result, traders and investors have become uncertain about the possible consequences of Powell's remarks on the market and are currently attempting to assess the situation. The increased unease surrounding the bank has exacerbated the feeling of uncertainty among investors, causing a decrease in cryptocurrency prices.
The negative impact has not been limited to Bitcoin alone. Still, it has also affected other prominent cryptocurrencies such as Ethereum (ETH), Dogecoin (DOGE), Ripple (XRP), and Solana (SOL), all of which have also incurred losses on the same day.
Dollar blasts two three-month highs
The uncertainty surrounding the decrease in inflation is reflected in the estimates of the extent to which the Fed would raise interest rates during its Federal Open Market Committee (FOMC) meeting, which is scheduled for March 22.
CME Group’s FedWatch Tool data indicates that the market currently expects a larger 50-basis-point rate hike, as opposed to the 25-basis-point increase in February.
Fed target rate probabilities chart. Source: CME Group
Bitcoin bulls could face an unfavorable situation as the U.S. Dollar Index (DXY) also presents a challenge. On March 7, DXY saw a significant increase, reaching 105.88 - the highest level it has been at since December 1, 2022. However, it then consolidated on the following day.
David Brady, an investor, warned to keep an eye on the U.S. Dollar Index (DXY) and highlighted a potential adverse scenario where it could make a higher high above 106, followed by a significant pullback or a dump below 100.
U.S. Dollar Index (DXY) 1-day candle chart. Source: TradingView
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