Tuesday, April 23, 2024
Market Analysis

2 more rate hikes? Bitcoin analyst counts down to ‘huge’ volatility

Bitcoin stayed motionless after the May 22 Wall Street open amid suggestions that United States interest rates may keep rising.

BTC/USD 1-hour candle chart on Bitstamp. Source: TradingView

Bitcoin analyst eyes “capitulation by time”

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD circling the range immediately below $27,000.

Despite some brief volatility for stocks, Bitcoin (BTC) remained firmly trapped in a range that it first entered 10 days prior.

For market commentators, the danger remained for a breakdown to result, with key trend lines such as the 200-week moving average (MA) potentially seeing a retest — or worse.

“This relentless sideways chop is boring AF and presents some challenges to traders, but IMO it’s a healthy consolidation,” monitoring resource Material Indicators summarized.

“The longer this continues, the stronger this zone gets as a present and future R/S flip zone.”

BTC/USD 1-day candle chart on Bitstamp with 100-day, 200-week MA. Source: TradingView

Analyzing downside scenarios, Material Indicators added that MAs may yet form a resistance/support (R/S) flip area of their own, spelling trouble for bulls.

“If the 100-Day MA continues to hold this becomes very strong support, but if the 200-Week MA breaks, it’s likely going to be very hard to climb back up to this level,” it said.

At the time of writing, the 100-day and 200-week MA stood at $26,530 and $26,280, respectively.

An accompanying print of the BTC/USD order book on largest global exchange Binance showed bid liquidity lying below the $26,000 mark.

BTC/USD order book data (Binance). Source: Material Indicators/Twitter

While existing price projections extend down to $24,000, popular trader Dann Crypto Trades offered an alternative roadmap of how the status quo could change.

“Capitulation,” he argued, could come simply due to the longevity of the trading range — speculators would sell in anticipation of a breakdown that might never happen.

“The longer we hover around this range low support, the more I’ve found myself starting to doubt it holds, even though the chart still looks perfectly fine. This is mainly due to the fact that any ‘support’ in 2022 eventually gave in after price sat on it for too long,” part of a Twitter thread explained.

“I think a good part of the market is conditioned this way and may cause a form of ‘capitulation’ by time instead of by price. What I mean by that is, people will sell out of positions to front run the potential breakdown due to boredom or expectation of a break lower.”

Meanwhile, Michaël van de Poppe, founder and CEO of trading firm Eight, was one of the voices calling time on the lack of BTC price action.

In a week at most, he argued, “huge” volatility would return.

Fed’s Bullard sees two further rate hikes

The day’s macro landscape saw some brief excitement as certain media accounts shared an image of an explosion at the U.S. Pentagon.

Related: Longing for liquidity — 5 things to know in Bitcoin this week

Soon revealed as an artificial intelligence (AI)-generated fake, the event nonetheless managed to move stock markets, which subsequently made up the losses.

“With multiple news sources reporting it as real, the S&P 500 fell 30 points in minutes. This resulted in a $500 billion market cap swing on a fake image,” financial commentary resource The Kobeissi Letter wrote in part of a reaction.

In a potential blow to risk assets on the horizon, meanwhile, the latest comments from the Federal Reserve placed fresh doubt on a June pause in interest rate hikes.

These came courtesy of Federal Reserve Bank of St. Louis President James Bullard, who predicted that no fewer than two further hikes would come this year.

“I’m thinking, you know, two more moves this year; exactly where those moves would be this year, I don’t know, but I’ve often advocated sooner rather than later,” he said at an event in Texas.

Fed target rate probabilities chart. Source: CME Group

CME Group’s FedWatch Tool put market expectations of a June rate hike pause at 68% at the time of writing, down from above 80% earlier in the day.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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