Bitcoin drops below US$23,000. What’s next?
Rising inflation and interest rate hikes weigh Bitcoin down. A drop to US$21,000 is a possibility based on the technicals.
Bitcoin dropped below US$23,000 as a rough weekend following Friday’s inflation report, which came with higher-than-expected numbers. At the time of publication, BTC is trading near US$22,700.
This could be a decent entry point if you’re long-term bullish on the price. However, we may see further weakness before things start to improve.
Technical analysis shows further downside
After taking out two major support zones this year — US$40,000 and US$30,000 — BTC may be headed toward US$20,000 in the weeks to come.
The daily BTC chart made a falling wedge pattern, a bullish pattern where the chances are higher of a break on the upside. This didn’t materialize, however, and the price pushed lower.
This opens the way to US$21,000 where the monthly 50-day moving average stands. This is the next support zone to keep an eye on below US$25,000. A break of this price means we’ll see BTC at US$20,000 very soon.
Fundamentals still weigh down the price
Rising interest rates and tightening monetary policy are the factors that can weigh down riskier assets the most. The reason behind this is that borrowing money to invest in riskier assets becomes more expensive. Borrowing costs will likely stay this way throughout the year and into 2023.
Until inflation numbers go down and the Fed stops tightening the monetary policy, Bitcoin will face downward pressure. In the best-case scenario, BTC will move sideways.
Bitcoin is heavily oversold
Bitcoin is now technically oversold, however. This means we could see a relief rally, combined with covering short positions, once we hit the range between US$20,000 and US$21,000. The rally could move the price back to US$30,000.
Long-term Bitcoin bulls may see this as a buying opportunity. Those who are more conservative may want to wait a bit for things to stabilize.
Binance freezes Bitcoin transactions
Also Monday, Binance – the world’s largest crypto exchange judged by volume - placed a temporary hold on Bitcoin transactions.
A tweet from the company blamed a “stuck” transaction for a backlog, and said it was working on a fix.
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Kliment Dukovski owns cryptocurrencies as of the publishing date.