After the mid-week blowout, the soufflé descended again on digital assets. At the time of writing, Bitcoin is trading against $20,485 after touching the $21,000 threshold. While it is obviously too early to talk about a bullish reversal, here are some price levels to watch. The close above the symbolic level of 20,000 dollars could prove decisive.
Bread on the plate for the bulls!
In the middle of the week, Bitcoin and the crypto market have finally moved. Stuck under $20,000 for several sessions, the mother of cryptocurrencies has come to break this bar. Driven by market action, but also by the enactment of legislation in the UK to grant status to digital assets. The crypto market also took advantage of the decline in the dollar to rise. Between Tuesday and Wednesday, the crypto market grew by more than 7% when many altcoins like Ethereum showed double-digit growth.
The following graph shows the price of Bitcoin in hourly data over the past week:
Macroeconomic variables continue to act as a catalyst!
This has been the case for several months. Inflation, which leads to a reaction by raising the key rates of the main central banks, is moreover the main variable around which the market has been pivoting for weeks. Each declaration of the FED is scrutinized with interest by the market. Publications of major macroeconomic indicators are just as important.
This week, the European Central Bank also raised its interest rates by 75 basis points. In accordance with what was expected by the markets, which had no positive or negative impact on the market. Across the Atlantic, the next Fed hike is expected. For now, economic players consider that this next increase will also be 75 basis points. As illustrated in the diagram below, accessible from the CMEGroup platform, nearly 85% of players expect such an increase:
While only 15% expect an increase of 50 basis points, it is interesting to note that the proportion has increased significantly over the past week. Last week, only 5% favored such an outcome. The rumor of a possible decline in the rise in rates from the November meeting therefore seems to be gaining ground. But most analysts are counting on December and especially the start of 2023 to see the rise in rates slow across the Atlantic. Either way, if the next rate hike announced is ultimately only 50 basis points, it’s a safe bet that the crypto market will experience a strong rebound.
Is the $14,000 threshold still a threat?
Many still believe that Bitcoin is not immune to a relapse. And the $14,000 hypothesis continues to fuel bull fears. Trader Rekt Capital highlights the resistance zone below $22,000 as important in the near term to keep the excitement around the rally going. Analyst Capo of Crypto, meanwhile, believes that the $21,500 area is a key area for consolidation. According to him, if Bitcoin manages to reach this milestone, the road to $23,000 could clear. Otherwise, the specter of yet another bull trap could resurface.
Especially since many indicators tend to support the hypothesis of an ultimate decline. This is particularly the case for the analysis of the average durations of bearish cycles. An average duration which is around 12.5 months on the crypto market. Started last November, we are approaching this duration. The percentage loss per cycle between the last ATH and the lowest point also suggests that a return below $15,000 is still quite possible. A possibility that some analysts call the ultimate scare.