Source: PaxForex Premium Analytics Portal, Fundamental Insight
Cryptocurrencies remain under pressure, and 2022 could result in another crypto winter, but selling pressure is fading in the short term. A potential short-covering rally may unfold after Bitcoin dropped 50%+ from its all-time high. It presents a swing-trade opportunity for traders with a higher risk profile, as the long-term trend remains bearish. Price action is likely to drop below the 30,000 psychological support level, with 25,000 a potential stop amid portfolio rotation among institutional investors.
Bargain hunters may step in following the massive sell-off, driven by a more hawkish US Federal Reserve, more governments taking a hostile stand towards cryptocurrencies and mining activities, and a broad-based sell-off across the financial system. Before turning overly bullish in the short term, Bitcoin continues to face the issues that plague it since its inception. Electricity consumption due to a dated proof-of-work protocol, scalability issues, transfer speed, and costs keep pressure on Bitcoin. While Bitcoin developers continue working hard to fix those issues for over a decade, third-generation cryptocurrencies have them fixed and gain real-world traction.
While institutional demand will not dissolve, and many participants prefer Bitcoin over alternatives, primarily due to its size compared to the cryptocurrency sector, traders should remain cautious. The recent pull-back and rebound offer an attractive short-term buying opportunity. Until the long-term scenario improves, bears remain in control of this cryptocurrency. Selling pressure will also remain in place until the global equity market sell-off concludes, which flirts with an official correction based on the closing price, taking the S&P500 as an example. The NASDAQ entered one, and some analysts wait if the correction will result in an official bear market or if the bulls can hold on to their run.
The forecast for the BTC/USD turned bullish in the short term, while the longer-term bearish trend remains intact. After the Kijun-sen and the Tenkan-sen turned sideways, short-term selling pressure faded, and this cryptocurrency pair stabilized at support. Price action may attempt a reversal into its gradually descending Ichimoku Kinko Hyo Cloud. The CCI moved out of extreme oversold territory, and traders may cautiously enter buy positions while closely monitoring price action. A breakdown below -100 will likely trigger more selling. Can bulls force the BTC/USD higher in the short term? 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 breakout above the $35,510 to $38,865 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 36,970
- Take Profit Zone: $43,895 – $46,800
- Stop Loss Level: 32,940
Should price action for the BTC/USD breakdown below $35,510, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 32,940
- Take Profit Zone: 25,785 – 28,720
- Stop Loss Level: 35,510
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
