Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin stabilized from its massive sell-off that took price action from close to 69,000 in November 2021 to below 19,000 in June 2022 for a 72%+ correction. A reversal is a healthy development, and while bulls may cheer the beginning of a new upside move that will lead to fresh all-time highs, the current situation differs from previous waves. Most of the BTC/USD rally, assisted by bottom-hunters from the die-hard bullish camp, was due to the US Federal Reserve, which began raising interest rates for the first time since Bitcoin launched.
Fears of inflation, recession, and stagflation resulted in a minor capital inflow into Bitcoin, as market participants who view Bitcoin as digital gold and an inflation hedge diversified their portfolios. The correlation between Bitcoin, most other cryptocurrencies, and equity markets has never been stronger since the emergence of the cryptocurrency sector. The bear market rally in equities lifted the BTC/USD, but price action and the charts indicate the absence of bullish pressures that can result in a surge to new all-time highs.
Bitcoin traders should prepare for an extended period of lower highs and lower lows, following equity markets, as the global economy cools and inflation persists. The New York Manufacturing Index for August reminded markets that the economy continues to slow sharply as the index plunged. Global central banks will continue to increase interest rates, and most consumers already face a cost of living crisis and live in a personal recession. The BTC/USD could rally above 43,000, which would complete a bear market rally or a bull trap, as it constitutes a 50% reversal. Massive price swings in cryptocurrencies are common, but the current wave and technical indicators suggest more downside for the BTC/USD, the cryptocurrency sector, and financial markets in general.
The forecast for the BTC/USD turned bearish after this cryptocurrency pair recovered into its flat Ichimoku Kinko Hyo Cloud, which maintains its gradual bearish shift, where it additionally struggles with a horizontal resistance area. Confirming the lack of short-term bullishness are the sideways drifting Tenkan-sen and Kijun-sen. Traders should monitor the CCI after it has formed a negative divergence in extreme overbought territory, followed by a breakdown below 100. A contraction below zero could trigger renewed selling pressure. Can bears regain control of price action in the BTC/USD and pressure price action into its horizontal support area and a fresh 2022 low? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the BTC/USD remain inside the or breakdown below the 23,410 to 25,150 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 23,920
- Take Profit Zone: 14,395 – 16,300
- Stop Loss Level: 25,970
Should price action for the BTC/USD breakout above 25,150, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 25,970
- Take Profit Zone: 27,480 – 28,795
- Stop Loss Level: 25,150
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
