BTCUSD
The Bitcoin price is wavering as the market reflect on the potential of high interest rates in the United States. BTC is trading at $57,500, which is slightly below this week’s high of $58,000. The currency’s market capitalization remains above $1 trillion.
What happened: The Bitcoin price is hovering near the important resistance level at $60,000 as the market reflect on the overall adaption and potential for high interest rates.
Yesterday, Galaxy Digital announced that it had acquired BitGo for $1.2 billion. This is the first billion dollar deal for a company in the industry. It came a few weeks after Coinbase Global went public, which is a sign that cryptocurrencies have come of age.
However, the BTC momentum has faded as investors react to the rising possibility of higher interest rates. On Tuesday, Janet Yellen stated the obvious when she said that the Fed will need to start tightening with the goal of preventing the economy from overheating.
Furthermore, data from the US shows that the economy has started to fire on all cylinders. Notably, the five-year breakeven rate, which signal of where the market expects inflation to be, has risen to a 2008 high of 2.68%. Bond yields have also resumed the upward trend. Therefore, there is a high possibility that the Fed will start talking about interest rates hikes and tapering.
Why it matters: The Fed has been relatively dovish, partly because of what happened in December 2018. After making a hawkish rate decision, stocks crashed, forcing the bank to hint at no rate hikes. Powell does not want a repeat of that.
So, will high interest rates cause the Bitcoin price to crash? In theory, BTC and other cryptocurrencies rallied because of the easy money policy. When it ends, there is a possibility that there will be a reversal. Nonetheless, the Fed will likely take a gradual approach, where it starts by tapering asset purchases and then hikes rates gradually. This could lead to BTC prices remaining at elevated levels for a while.
The upcoming US non-farm payrolls and initial jobless claims will be key. If data shows that the economy is adding more jobs, it could force the Fed to shift its tone. For a while, this will be bearish for the BTC and other cryptocurrencies.
The daily chart shows that the Bitcoin price has been in a consolidation mode recently. The price remains in a channel whose support and resistance are at $47,509 and $61,165, respectively. At the same time, the Relative Strength Index (RSI) shows that there is a bearish divergence happening. This is further evidenced by the MACD.
Therefore, in the near term, the outlook for BTC is neutral, but we can’t rule out a major pullback as investors focus on interest rates. The downward breakout will be validated if the price drops below $47,509. The bearish prediction will be invalidated if the price rises above the resistance at $61,165.
Please don’t consider this investment advice. Views expressed here are those of the writer and the writer and InvestingCube will not be held liable for any losses.
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