Crypto analysis: Bitcoin struggles at $25K
• Risk off in equity markets pose threat to positively correlating crypto prices
• Rising bond yields increase opportunity cost of holding zero-yielding assets
• Dollar strength weighs on nearly all dollar-denominated assets
Bitcoin has started to print bearish price action again after being unable to hold its breakout above the August high, around 25K. While it hasn’t quite sold off, the potential is there for a sizeable drop because of the renewed weakness we have seen across risk assets in recent days. What’s more, the strength in bond yields is continuing to increase the opportunity cost of holding zero-yielding assets like gold and Bitcoin.
Yields have been on the ascendency since the start of the month, when the Fed and ECB both appeared more hawkish than the markets had anticipated. Incoming data since those central bank meetings have been mostly better-than-expected, with US inflation and jobs data in particular supporting the view that more rate hikes are needed to cool the economy.
But will today’s FOMC minutes match the recent hawkish FedSpeak? If it does, then l reckon both the dollar and yields will rise further, an in turn hurt BTC/USD.
There’s been some talk that policymakers are looking to return to 50 basis point rate hikes again, but I highly doubt this is going to be the case as the Fed has already tightened its policy aggressively and will now go in with smaller increments so as to avoid an unwanted hard landing. Still, markets have realised that the Fed wants to keep its contractionary monetary policy in place longer than they had expected at the back end of last year and start of this year, owing to further improvement in US data and sticky inflation.
Tactically, the bears could step in more aggressively than we have seen if BTC/USD were to break below its most recent low at $23,840. If that happens, then price could follow the path we have created on the chart.
The bulls meanwhile will want to see a clean breakout above 25.2K to confirm the bullish reversal. That’s because the fake out above this level on Tuesday has raised doubts over the bulls’ conviction.
-- Written by Fawad Razaqzada, Market Analyst with FOREX.com
Follow Fawad on Twitter @Trader_F_R
• Rising bond yields increase opportunity cost of holding zero-yielding assets
• Dollar strength weighs on nearly all dollar-denominated assets
Bitcoin has started to print bearish price action again after being unable to hold its breakout above the August high, around 25K. While it hasn’t quite sold off, the potential is there for a sizeable drop because of the renewed weakness we have seen across risk assets in recent days. What’s more, the strength in bond yields is continuing to increase the opportunity cost of holding zero-yielding assets like gold and Bitcoin.
Yields have been on the ascendency since the start of the month, when the Fed and ECB both appeared more hawkish than the markets had anticipated. Incoming data since those central bank meetings have been mostly better-than-expected, with US inflation and jobs data in particular supporting the view that more rate hikes are needed to cool the economy.
But will today’s FOMC minutes match the recent hawkish FedSpeak? If it does, then l reckon both the dollar and yields will rise further, an in turn hurt BTC/USD.
There’s been some talk that policymakers are looking to return to 50 basis point rate hikes again, but I highly doubt this is going to be the case as the Fed has already tightened its policy aggressively and will now go in with smaller increments so as to avoid an unwanted hard landing. Still, markets have realised that the Fed wants to keep its contractionary monetary policy in place longer than they had expected at the back end of last year and start of this year, owing to further improvement in US data and sticky inflation.
Tactically, the bears could step in more aggressively than we have seen if BTC/USD were to break below its most recent low at $23,840. If that happens, then price could follow the path we have created on the chart.
The bulls meanwhile will want to see a clean breakout above 25.2K to confirm the bullish reversal. That’s because the fake out above this level on Tuesday has raised doubts over the bulls’ conviction.
-- Written by Fawad Razaqzada, Market Analyst with FOREX.com
Follow Fawad on Twitter @Trader_F_R
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