Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin is caught between a rock and a hard place, at least over the next six months. Volatility dropped to 2022 lows and reached almost historic lows, which suggests massive price movements ahead. While reason exists for long-term bullishness, traders should remain cautious in the near term. Bulls point to JP Morgan Chase, led by cryptocurrency critic Jamie Dimon, which completed its first-ever cross-border transaction using decentralized finance (DeFi), which runs on blockchain-based technology.
JP Morgan and partners used the Ethereum layer-two network Polygon, transacted with the Monetary Authority of Singapore (MAS). It was a pilot program, completed successfully. Other participating financial institutions were DBS Bank (Singapore), SBI Digital (Japan), Marketnode (the digital asset platform of the Singapore Exchange), and Temasek (one of the two sovereign wealth funds of Singapore). The successful pilot program to bridge traditional finance and blockchain-based financial transactions is a massive leap forward. It does not bode well for first-generation projects like Bitcoin and Ethereum. While Polygon remains based on the Ethereum blockchain, the future of cryptocurrency opportunities lies with second and third-generation projects.
In the meantime, the outlook for Bitcoin remains bearish as inflation remains elevated, risks to turn into hyperinflation, and paves the path for a best-case scenario of stagflation for the global economy for several years. It does not paint a bullish picture for Bitcoin, except for near anarchy or total collapse, like in Lebanon, where Bitcoin replaced the broker financial system. The US Federal Reserve will hike interest rates further as the crushing debt mountain expands, and it applies downside pressure on the price action in Bitcoin. Portfolio managers may sell Bitcoin as they raise capital to deploy in the stock market, where attractive opportunities await, but the bear market has more room to run.
The forecast for the BTC/USD remains bearish in the short term, with price action inside of its narrowing Ichimoku Kinko Hyo Cloud, approaching its Senkou Span A. With the current trajectory, a bearish crossover could follow, initiating a fresh double-digit contraction. Adding to the negative outlook are the flat Kijun-sen and Tenkan-sen, which trend sideways and confirm the absence of bullish momentum. Traders should monitor the CCI after it has formed a negative divergence in extreme overbought territory, followed by a breakdown and reversal, from where more downside is likely. Can bears maintain control over the BTC/USD and force price action into its horizontal support area for a 25%+ correction? 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 20,580 to 21,630 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 20,810
- Take Profit Zone: $14,395 – $15,700
- Stop Loss Level: 23,040
Should price action for the BTC/USD breakout above 21,630, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 23,040
- Take Profit Zone: 24,470 – 25,470
- Stop Loss Level: 21,630
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