Bitcoin has stopped the bullish rally in recent weeks and has corrected from all-time highs of about $ 58,000 to $ 43,000. What happened is explained by various reasons, from the sale of “whales” and miners to the growth of government bond yields. Analyst Michael van de Poppe spoke about the technical picture in the market.
On the 2-hour chart, Bitcoin remains in a clear downtrend from its February highs. Since that time, supports around the $ 55,000 and $ 52,000 levels have turned into resistance, suggesting further declines in the short term. During the week, bitcoin tried to overcome the immediate resistance, but did not succeed in it. Such a refusal entails risks of further decline. In this case, it is critically important to keep the support near $ 48,300 and $ 48,800 – this opens up the opportunity to retest $ 52,000. Once it falls below these levels, Bitcoin will be ready to head into the green zone on the chart to retest it. Thus, the correction cannot be considered complete, the analyst said.
A clear uptrend persists on the weekly chart, so short-term corrections should not yet be considered a reversal of a longer-term trend. Any bull cycle is characterized by periods of consolidation and correction, and March has historically not been a good month for Bitcoin. Typically, such corrections are limited to a decline to the 21-week moving average, which is the division between bullish and bearish trends. This line now passes at $ 29,000, but in a few weeks will rise to $ 33,000 – 35,000. As long as the price remains above $ 30,000, investors should not worry about breaking the bullish trend, the analyst said.
The primary reason for the current weakness is shown in the chart above. The yield on 10-year US government bonds has climbed to the highest level in the last year, pushing investors away from the store of value, which includes bitcoin and gold. Besides, the dollar is showing signs of recovery.
At the same time, Goldman Sachs analysts say traders may overestimate the prospects for removing stimulus measures taken by the Federal Reserve since last year.
“The earliest when the Fed will start talking about curtailing the purchase of bonds is the end of 2021. Any discussion of raising interest rates will take place only a year after that, ”a bank spokesman said in an interview with CNBC.
The alignment of positions in the futures market indicates that traders are now betting on the first rate hike in 2022, whereas four weeks ago they assumed that this would not happen until 2024.
“This seems aggressive to us,” Goldman Sachs said, adding that the Fed has not even begun to cut its current bond purchases by $ 120 billion a month, thus further supporting the economy after interest rates were lowered to near-zero levels.
The Fed itself says it plans to continue buying $ 120 billion in bonds a month until it sees significant signs of recovery. Goldman Sachs also notes that interest rates will remain at record low levels for some time even after inflation surpasses the 2% target.
One of the consequences of such a reassessment of the market situation is a decrease in the attractiveness of bitcoin, and the likely drop in bond yields will be positive news for cryptocurrency and gold. The Fed is expected to provide additional clarity in the coming weeks.
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