Bitcoin hit a low of $33,000 on Monday. A bounce has seen it get back above $36,000. Is the low now in, or is this just a short sideways movement before continuing the plunge to $30,000?
The Federal Reserve holds its first FOMC meeting of the year today. What comes out of this two-day meeting could cause a big reaction in world markets. Fed chairman Powell goes into the meeting on the back of a particularly hawkish promise to end tapering quicker, and to impose at least three rate hikes this year.
Should Powell stick to his guns, then the stock market is going to face a lot of downside pressure, and crypto, considered a leading indicator for macro markets by some, could well take another leg downwards. A decisive break of the $30,000 resistance would likely see bitcoin heading back down to $20,000, a level not seen since the market top of 2017 which turned this level into support.
However, that worst case scenario is probably not likely yet. At least in the short term. Powell could still come out of the meeting tomorrow and convey more of a dovish tone, given that a lot of steam has already evaporated out of the markets.
According to Gareth Soloway, who appeared on Crypto Banter on Monday, the Fed is between a rock and a hard place. He thinks the Fed will only be able to raise interest rates a couple of times at most, given that this is likely to throw markets into a tailspin.
For bitcoin, it looks like it is very oversold right now. Just talk from the Fed of raising rates has seen the number one crypto currency fall quite dramatically. We are now at a point where the RSI looks to have bottomed, or to be nearing the bottom, on all higher time frames.
Leverage in the system is still way too high though and many experts, including Soloway, believe that a bounce from here to around $46,000 is likely, but that the leverage still needs to be flushed out.
Perhaps Soloways’s prediction that bitcoin will fall to sub $20,000 will signal absolute capitulation, and allow the crypto market to recover and continue its upward trajectory on a more solid technical structure.
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