Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin finally crossed the $25,000 barrier, reversing some of its recent losses. According to CoinMarketCap, it briefly peaked at $25,135, a level we haven't seen since mid-June. Bitcoin closed that day up about 20% from the previous month, leading some analysts to hope that the worst for the crypto market is over.
There are several factors contributing to the recent rise in bitcoin prices. Market sentiment, a key factor in cryptocurrency markets, hasn't been this optimistic since April. For months, the cryptocurrency fear and greed index has been somewhere between "fear" and "extreme fear." The other day it moved into "neutral" territory, reflecting a tentative sense of optimism.
Moreover, it looks like the worst of the collapse of decentralized finance may be behind us. After Terra collapsed in May, the contagion spread to several other cryptocurrency platforms, including Celsius, further upsetting crypto markets. Not to be too optimistic, if the shocks after the Terra crash pass, the industry could begin to rebuild user confidence.
There is a growing correlation between cryptocurrency prices and global equities, especially tech stocks. Stocks rose last week on news that inflation was down slightly, raising hopes that we may have turned a corner. Strong employment data and positive corporate earnings reports added to investors' optimism.
Crossing the $25,000 mark is positive news, but bitcoin has a long way to go before it returns to last year's highs of over $68,000. It's also worth noting that bitcoin hasn't been able to stay above $25,000 - it's currently trading at around $23,400. Bitcoin needs to consolidate above $25,000 or even higher before a recovery can be talked about.
Some factors could stop this nascent price rebound. Here are some of them to watch out for:
- Global Energy Crisis: Russia's invasion of Ukraine has caused a global energy crisis that has driven up prices in Europe, the U.S., and many other countries. With the onset of winter and no sign of an end to the conflict, this crisis is far from over.
- Inflation: Inflation has declined slightly, but it is still high. In addition, if energy prices rise further in the coming months, there could be a corresponding increase in the cost of living. As we will touch on in the next paragraph, high inflation could cause the Fed to act harshly, affecting cryptocurrencies.
- Federal Reserve action: The Fed's efforts to fight inflation have played a big role in lowering the price of cryptocurrencies this year. Tightening economic policy has caused investors to pull away from risky assets such as cryptocurrencies. All eyes will be on the Fed's next meeting in September to see if there will be another rate hike.
- Regulation: Increased regulation of cryptocurrencies is inevitable, but we still don't know what form it will take - especially in the U.S. Tough regulation could have a strong impact on cryptocurrency prices in the short to medium term.
- Ethereum merger: The long-awaited Ethereum merger is due to take place in mid-September and is likely to be the most important thing to happen in the crypto industry this year. The anticipation of the merger continues to push the price of ETH up and create positive momentum for the broader market. However, technical problems or further delays could derail this sentiment.
If you are considering buying cryptocurrencies in the coming weeks, be careful. Make sure you understand the risks and only invest money you can afford to lose. Bitcoin and other cryptocurrencies are still volatile assets, and we don't know much about how the market will develop.
It is extremely unlikely that bitcoin will suddenly return to over $68,000 shortly. So take your time, think about how the cryptocurrency will fit into your broader investment portfolio, and take care of other financial assets before buying bitcoin or any other cryptocurrency.
As long as the price is above the 18500.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 23264.00
- Take Profit 1: 25200.00
- Take Profit 2: 29000.00
If the level of 18500.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 18500.00
- Take Profit 1: 15000.00
- Take Profit 2: 13000.00