Bitcoin Dips 1.8% Amid Broader Market Trends and Federal Reserve's Interest Rates Decision
Summary:
Following a failure to break the $43,850 resistance level, Bitcoin's price dipped 1.8% to a low of $41,860 on February 1. This reflects wider market trends and is associated with the Federal Reserve's decision to retain current interest rates, outflows from the Grayscale Bitcoin Trust, increasing apprehensions about the release of Bitcoin from the dormant Mt. Gox exchange, and Bitcoin miners' mass selling. According to technical analysis, Bitcoin could recover towards $44,000 in the following days or further fall to near $35,975 if the price significantly plunges below the 50-day exponential moving average.
Bitcoin (BTC) experienced a 1.8% slump, hitting a low of $41,860 on February 1, extending a wider market slide that began two days prior when the cryptocurrency couldn't shatter the critical $43,850 resistance level. Multiple factors contributed to the ongoing decline of Bitcoin, as elaborated below.
The Federal Reserve's decision regarding interest rates seems to be a considerable influencer of Bitcoin's falling price. The U.S. Central Bank decided on Jan. 31 to stick with its interest rates of 5.25% to 5.5%. Chairman Jerome Powell quashed hopes of a rate cut in March, indicating that any reconsideration would only transpire once there is confidence in a durable reduction in inflation. This firm stance of the Fed is perceived negatively for risk-oriented assets like Bitcoin. With no rate cuts, borrowing costs stay high, which might decrease investments into high-risk assets such as cryptocurrencies.
Furthermore, this week witnessed outflows from the Grayscale Bitcoin Trust (GBTC) and anxieties regarding the possible release of Bitcoin from the dormant Mt. Gox exchange. This has infused fear and uncertainty in the market.
There has also been unease following the U.S. government's January 26 announcement of its plans to sell nearly 2,934 Bitcoins valued at about $120 million. Other issuers of Bitcoin spot ETF such as Fidelity and BlackRock, however, are offsetting some of the selling pressure.
Significantly, Bitcoin's drop is also associated with Bitcoin miners offloading their holdings. The Bitcoin supply held by miners has been on a downward trend since Nov. 11. This selling behaviour contributes to the downward momentum on Bitcoin prices.
Based on technical analysis, Bitcoin's price correction commenced at a resistance junction of a descending trendline and a horizontal level around $44,000. The trading volume over the last two days doesn't exhibit a substantial increase, which suggests the price drop may lack robust conviction; therefore, Bitcoin could sustain above its 50-day exponential moving average (50-day EMA) at approximately $41,920. Consequently, in the coming days, Bitcoin's price could recover toward the $44,000 mark. Conversely, if the price considerably falls below the 50-day EMA, the chances of a further fall towards the lower trendline of the falling channel, which aligns with the 200-day EMA wave near $35,975, increases significantly.
Please note: This information does not constitute financial advice. It is always recommended that individual readers carry out their research considering the risks involved before making investment decisions.
Published At
2/1/2024 5:59:20 PM
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