Key Bitcoin Takeaways
- Bitcoin slipped in the early trading hours on Monday.
- The cryptocurrency’s latest breakout attempt above $60,000 met with modest selling pressure.
- It now risks falling below $55,000 amid rotational trading.
Bitcoin traded lower heading into the new weekly session Monday.
The benchmark cryptocurrency fell by more than 1.5 percent ahead of the European session open, wobbling above and below a technical support level of $57,000. Meanwhile, it attempted to reclaim its 50-4H simple moving average (the blue wave in the chart below) as support after breaking below it during the Asia-Pacific session.
Late last week, Bitcoin corrected lower after briefly breaching $60,000, a psychological resistance level. Traders used the top to secure their profits. The prospects of further recovery in the US dollar index, led by a recent spike in the longer-dated government bond yields, kept investors’ upside bias towards Bitcoin in conflict.
Higher interest rate returns in the US bond market tend to make the dollar more attractive than its foreign peers. Meanwhile, a stronger dollar reduces the appeal of holding other safe-haven assets, like bitcoin and gold. Bitcoin’s growing adoption on Wall Street has pushed its prices higher, but yield fears have counterbalanced its bullish breakout attempts.
Bitcoin enters the week while looking for further cues on its next short-term bias. On Wednesday, the Federal Open Market Committee will release the minutes of their March meeting.
The Federal Reserve had revised their median forecast for the US economy to positive after their two-day meeting last month. The central bank said that it expects the US gross domestic product to grow by 6.5 percent this year versus the 4.2 percent it anticipated in its December meeting. It also said that the unemployment rate would come down to 4.5 percent by the end of this year.
Nonetheless, the Fed also said that it would keep its benchmark interest rates near zero until 2024. The central bank’s latest forecast shows that the core inflation would rise to 2.4 percent in 2021, exceeding its inflation target of 2 percent. Bitcoin has risen in the previous 12 months, mostly owing to fears of higher inflation.
Traders perceive the cryptocurrency as an anti-inflation asset. Therefore, FOMC minutes expect to provide bitcoin investors more cues to determine their short-term outlook in the market.
A confirmed breakdown below $57,000 could have traders open short positions towards the next immediate downside target near the 200-4H moving average (the orange wave). Traders could also place bets on large wicks forming below $55,000, based on bitcoin’s recent price actions.
Conversely, an aggressive bounce back from the $57,000-support (accompanied by higher volumes) could have traders place a long bet towards $60,000. It appears bulls would await further confirmation from the Fed before going all-in on the $60,000-level.
Note: The author holds Bitcoin.