A strong sell-off near the $11,800-levels in the past 24 hours led the Bitcoin price lower by more than 6 percent.
The benchmark cryptocurrency fell prey to an extended period of profit-taking by daytraders. It attracted lower bids as investors’ uncertainty over inflation increased ahead of the Jackson Hole meeting of monetary policymakers on Thursday and Friday. Bitcoin’s top safe-haven rival gold, too, fell on Tuesday on a similar outlook.
The expectations of higher inflation, led by the Federal Reserve’s infinite bond-buying program and near-zero interest rates earlier pushed Bitcoin upward by more than 200 percent from its mid-March nadir.
The cryptocurrency established its year-to-date peak at circa $12,486 on August 17. But it failed to find new buyers near the local top, which later led to a sharp price correction. As of this Tuesday, Bitcoin was trading as much as 11.07 percent below its YTD high.
Many analysts earlier predicted that slipping below $11,000 could set Bitcoin en route to lower levels at or below $10,500. The cryptocurrency found a decent buying sentiment above the said support level–at around $11,102. Nevertheless, growing uncertainty over inflation kept the cryptocurrency under the risks of further downsides.
Bitcoin Cautious ahead of Jackson Hole
Global financial news reported a conflict in views of economists regarding the inflationary outlook.
One clan stated the Fed’s relentless money spending to aid the US economy through the coronavirus pandemic may lead to a weaker US dollar. While the other pointed towards the record-high unemployment rates that may end up affecting demand for goods and services, thereby leading to deflation.
As the confusion grew, economists awaited for the Federal Reserve Chairman Jerome Powell’s keynote address at the virtual version of the annual Jackson Hole conference in Wyoming. Mr. Powell earlier committed to providing full support to the US economy is tackling the ongoing economic crisis.
Bitcoin observers believe the Fed’s easing outlook would make the cryptocurrency more expensive. Some even suggested that its price may hit $20,000 by the end of this year, including Bloomberg Intelligence’s senior commodity strategist, Mike McGlone.
Stuck between 3-9x over the past few years, the price of #Bitcoin per ounce of #gold tilts the crypto toward resuming appreciation, if volatility history tells us anything. The Aug. 19 cross rate of 6x is the same as in 2017, yet Bitcoins's volatility has dropped relative to gold pic.twitter.com/CD29iOVXDS
— Mike McGlone (@mikemcglone11) August 20, 2020
But BTC/USD is doing a complete opposite. It shows that nothing about an inflationary outlook is certain, at least in the minds of those who speculate on cryptocurrencies. The pair now needs to hold above $10,500, a key support level, to maintain its safe-haven narrative against the fears of inflation.
If Bitcoin loses the support, then it risks declining further below $10,000.