‘Crypto Winter’ May Worsen if Bitcoin Falls Below $20,000
Bitcoin, Ethereum Outlook:
- Bitcoin prices edge slightly higher despite waning sentiment
- USD strength supports USDC Stablecoin
- Technical levels continue to provide support and resistance for price action
Recession Fears Remain a Key Catalyst for Risk Assets, Bitcoin and Ethereum Edge Slightly Higher
After posting its largest losing streak since 2014, Bitcoin is finally in the green, trading slightly above the $20,000 handle.
As the critical psychological level remains key for bulls and bears alike, a resurgence in recession fears and monetary policy have proven to be major catalysts for Bitcoin, Ethereum and their alt-coins counterparts.
- A 75 basis point rate hike from the US Federal Reserve (the sharpest increase since 1994)
- A 25 basis point rate hike from the BoE (Bank of England)
- An unexpected 50 basis point rate hike from the Swiss National Bank (the first hike since 2015)
With the hawkish narrative weighing on sentiment, the massive sell-off in digital assets was further exacerbated by mounting insolvency risks for Celsius (a cryptocurrency loan company) as well as the decision to reduce the Coinbase workforce by 18%.
Bitcoin Key Technical Levels
After trading within a tight range, formed by key Fibonacci levels from the 2020 – 2021 move (purple) and the Dec 2020 – Jan 2021 move (blue), the release of the US CPI report last Friday enabled bears to gain traction, driving prices back towards the $20,000 handle, which continues to hold as critical support while volume remains high, suggesting that sellers continue to dominate price action, at least for now.
Bitcoin (BTC/USD) Daily Chart
Chart prepared by Tammy Da Costa using TradingView
While prices continue to trade at an 18 month low, Bitcoin has shed over 70% of gains (YTD). For bulls to drive prices higher, a break of $22,000 and the $22,802 retracement could see a potential retest of $24,000.
However, if bearish momentum holds, a break of $20,000 could bring $18,000 into play, opening the door for the Dec 2020 low at $17,580.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.