Source: PaxForex Premium Analytics Portal, Fundamental Insight
After a powerful start to 2023, following the rally in equity markets, the cryptocurrency sector stalled, and market cap leader Bitcoin collapsed nearly 7,000 points before creating a bull trap by rallying 2,000+ points. Price action faces numerous developments dotted across bullish and bearish camps, suggesting traders should brace for a volatile summer. The recent advance followed a similar pattern displayed in the past, where perma-bulls seek to hype Bitcoin with massive price predictions of a 10x rally and Bitcoin at 100,000. Underlying fundamentals show a crosscurrent of developments, and smart traders pay attention to both before deciding how to approach Bitcoin.
While the US Federal Reserve paused its interest rate hike campaign last week after increasing rates by 500 basis points over ten consecutive meetings, more hikes are on the horizon. Many Bitcoin traders point to the start of interest rate hikes by the Fed as the primary driver for the collapse in Bitcoin, which wiped out over $2 trillion in market cap. They also believe ending interest rate hikes will allow Bitcoin to rally magically above 60,000 and well beyond.
Blackrock could issue its first spot Bitcoin ETF, which would create physical demand and aid bulls in adding to recent price gains. Some focus on China and its expected stimulus worth estimated trillions of dollars, which may inflate every aspect of its supply chain reach. Before Bitcoin traders jump on hypothetical drivers, they should realize that stimulus will add to global inflation, which could keep central banks raising interest rates further, and maintaining them at elevated levels for longer. It would boost bearish pressures on Bitcoin, which could trump bullish developments. Caution and an open mind are the best approaches for Bitcoin this summer, as the path of least resistance is down, enforced by its descending Ichimoku Kinko Hyo Cloud.
The forecast for BTC/USD remains bearish after price action retreated by over 5,000 points. Adding to ongoing downside pressure is the downward shifting Ichimoku Kinko Hyo Cloud and the descending Tenkan-sen. The Kijun-sen flatlined but should follow other technical indicators lower, accelerating the preceding correction. Traders should also monitor the CCI after it accelerated out of extreme oversold territory. This technical indicator could reach extreme overbought conditions and set e lower high before reversing. It would provide traders with a final sell signal. Can bears maintain downside pressure on the BTC/USD and pressure this cryptocurrency pair into a multi-month low at its horizontal support area? 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 26,210 to 27,115 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 26,750
- Take Profit Zone: 19,530 – 21,320
- Stop Loss Level: 27,450
Should price action for the BTC/USD breakout above 27,115, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 27,450
- Take Profit Zone: 28,150 – 28,945
- Stop Loss Level: 27,115
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