Bitcoin experienced a decline from its high in March, driven by a more powerful US dollar and geopolitical tensions. What might lie ahead for it?
Bitcoin’s price has dropped significantly, sitting at approximately $63,000 as of April 16th. This is a departure from its record-breaking high of $73,750 reached on March 14th, representing a 15% decrease from the peak.
In simple terms, the price of Bitcoin reached new peaks mainly due to the SEC’s approval of Bitcoin spot ETFs in January 2024. This decision attracted significant investments from institutions, resulting in a substantial increase in market value.
On April 15, there was good news from Hong Kong regulatory authorities as they approved the launch of Bitcoin and Ethereum Exchange-Traded Funds (ETFs), based on the HashKey blog post.
Although positive signs exist, Middle Eastern geopolitical conflicts continue to dampen investor interest.
During this time, the fear and greed index, which measures investor emotions, has seen a significant drop from its past peaks.
The index, previously surging above 90 when Bitcoin hit its peak in March, has since dropped to 65. This decline indicates a gradual loss of investor trust, potentially caused by a mix of political instability and investors cashing out their profits.
So, what’s really happening in the Bitcoin market, and where could BTC be headed next?
Factors affecting BTC price action
Several macroeconomic factors are at play that are affecting BTC price action. Let’s analyze them one by one:
Strengthening of U.S. dollar
In the last three weeks, the US Dollar Index, representing the value of the US dollar against a group of other currencies, has experienced a significant increase of 1.84%. Simultaneously, Bitcoin’s price has decreased.
The US Dollar Index’s value may continue rising, potentially reaching over 107, which represents the middle point of a significant 13% decrease in value that occurred between September 2022 and July 2023.
If this prediction is accurate, Bitcoin could experience more declines unless a new surge pushes its price up to offset the US dollar’s power.
An important factor contributing to the dollar’s power is the shifting perspectives towards potential interest rate decreases from the U.S. Federal Reserve.
Based on Bank of America’s predictions, inflation could reach 4.8% by the time of the 2024 election, fueling worries over rising prices.
For the past three months, the average monthly increase in Consumer Price Index (CPI) inflation has been 0.4%. This suggests that there is a continuous rise in inflation.
Surprising data point: The US Consumer Price Index (CPI) inflation could reach approximately 4.8% by the 2024 elections, according to Bank of America’s predictions. Over the past three months, the average monthly increase in CPI has been around 0.4%. If this rate persists, it will result in a yearly inflation rate of…
— The Kobeissi Letter (@KobeissiLetter) April 15, 2024
If the current trend persists, annual inflation may hit its peak since April 2023, significantly exceeding the Federal Reserve’s desired 2% cap.
Beforehand, there were expectations that the Federal Reserve would initiate interest rate reductions in June. But, the surprising increase in Consumer Price Index (CPI) data has caused some to question if the Fed might postpone these cuts, resulting in a stronger US dollar.
During periods of economic instability or when conventional investments like the US dollar seem vulnerable, crypto assets are frequently viewed as attractive alternatives.
When the dollar gets stronger because of postponed interest rate reductions, people might prefer to keep or put their money in conventional investments such as the dollar, causing less interest in Bitcoin and other cryptocurrencies and decreasing their demand.
Rising geopolitical tensions
In the past week, the Middle East has seen an increase in hostilities, most notably caused by Iran’s drone attack, which could affect financial markets, including Bitcoin, with possible consequences.
During periods of political instability among nations, investors look for secure investments thought to provide consistency and shield them from the unpredictable swings of the market.
Investors often turn to assets like the US dollar and gold during uncertain times due to their perceived safety. The value of these assets has been increasing recently.
In the past, times of international conflict or instability have frequently led to an increase in the value of the US dollar.
During times of increased political instability in the Middle East, like during the Gulf War in the early 1990s and the Iraq War in the 2000s, the US dollar saw an uptick in value due to investors looking for a secure investment option amidst the geopolitical turmoil.
Where could BTC price head next?
Bitcoins currently control approximately 55% of the total $2.27 trillion value in the digital currency market, which is a figure last observed about three years ago.
Yet, Bitcoin’s price has fallen around 16% from its high in March. Several other cryptocurrencies have experienced steeper decreases, reaching over 30-40% in value reduction.
The addition of Bitcoin ETFs tradeable on the Hong Kong stock exchange first caused a surge in its price, reaching a peak of $66,500. Yet, due to political uncertainties, the price has since dropped.
In simple terms, the next major happening for Bitcoin is the imminent halving, which is right around the corner and historically, this phase has been characterized by a bearish market attitude. It’s possible that this trend could persist over the next few months.
According to well-known analyst Willy Woo, if Bitcoin’s price dips below the $58,900 mark, which serves as a key support level for short-term investors, there is a risk of a downturn in its price trend.
Based on my observation, the markets currently look like this:
— Willy Woo (@woonomic) April 15, 2024
“He highlights the significant decrease in the cumulative volume delta (CVD), an indicator that monitors market orders, as evidence of selling activity.”
According to cryptocurrency expert Michaël van de Poppe’s assessment, Bitcoin is presently maintaining its base with a likely gradual climb ahead.
Bitcoin has withstood the recent rejection on lower timeframes at its current support level. If this support gives way, a drop to around $55,000 could occur. However, I believe it is more probable that we will hold here and commence a gradual ascent.
— Michaël van de Poppe (@CryptoMichNL) April 16, 2024
However, he cautions that a loss of support could lead to a further decline towards $55,000.
With these conditions and the impending halving event, get ready for heightened price fluctuations in the near future. Try to keep calm and invest merely what you’re willing to part with if things go awry.
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2024-04-16 18:11