Bitcoin has dropped back below $20,000 at the time of writing, though HODL-ers are attempting to stop the rot around current levels.
The world’s largest cryptocurrency has held relatively steady around this psychologically-important mark since the middle of June amid the ongoing crypto winter.
Despite posting an 8% advance last week through Sunday, marking its largest weekly gain since March, Bitcoin remains resisted around its 200-week moving average, with the technical indicator switching roles, from a support to a key resistance level.
What are risk assets afraid of?
Risk assets, including cryptos, are still grappling with the concerns stemming from inflation staying persistently elevated.
Markets will be paying close attention to Wednesday’s release of the June US consumer price index (the CPI is the benchmark gauge used to measure inflation). Economists are predicting that consumer prices rose by 8.8% in June, compared to the same month a year ago (June 2021). If tomorrow’s official figures confirm as much, that would be the fastest year-on-year rise for US inflation since December 1981.
A four-decade high in US inflation is likely to hasten the Fed’s plans for raising interest rates.
Recall that Fed Chair Jerome Powell has left the door open for a second successive 75 basis point hike at the FOMC meeting later this month. Markets have nearly fully priced in such a jumbo-sized hike, hence the US dollar running rampant.
Generally, risk assets quiver at the thought of higher US interest rates, with Bitcoin being no exception, while the Fed is also bringing the curtains down on its easy-money era.
Bitcoin could see a rapid drop to $10k
The fact that stronger hands have kept the world’s largest cryptocurrency hovering around $20k in recent weeks may offer some measure of solace for crypto investors, at least for the time being.
Still, the near-term outlook suggests a bias for more declines for Bitcoin and the rest of the crypto complex, considering that risk-taking activities across asset classes have been crippled by these macro concerns:
‘Rising wedges’ technical trend suggests another sudden drop for Bitcoin
From a technical perspective, Bitcoin could see another massive decline, if the aftermath from May’s ‘rising wedge’ pattern is repeated in the near future.
A ‘rising wedge’ is widely viewed as a bearish signal.
At least the move towards $10k, if it happens akin to the mid-June plummet, is likely to be swift.
Bitcoin at $10k would leave only the staunchest of Bitcoin believers holding on, with hopes that the world’s largest crypto will eventually return to its glory days once after this crypto winter passes.