[ad_1]
As bitcoin sees signs of life after a month of dashed hopes, experts warn it may be too early to call for a resumption of the broader bull run.
The cryptocurrency hit 2.5-week highs above $ 40,000 early Tuesday, after finding offers nearly $ 36,000 over the weekend after Tesla CEO Elon Musk called said the automaker could resume bitcoin transactions if miners meet environmental standards.
Some observers view Musk’s comments as extremely optimistic, as they show concerns about the negative environmental impact of mining that was partly responsible for the 35% drop in May are transient.
However, macro and crypto-specific factors, including the impending U.S. Federal Reserve meeting, bitcoin’s dominance rate, and technical charts, warrant caution on the part of the bulls.
Let’s take a look at these factors in detail.
The Fed fears
The Federal Open Market Committee (FOMC) is scheduled to meet Tuesday and Wednesday to discuss the policy. Fed Chairman Jerome Powell will hold a post-meeting press conference at 2 p.m. ET on Wednesday.
While the central bank is likely to keep key policy tools unchanged, some analysts fear the bank may take a slightly less accommodating tone in the wake of rising inflation.
“While we believe that most members of the Fed will be determined to keep interest rates on hold until they see signs of a sustained price increase, we also expect that a handful of voting members are improving their interest rate projections over the forecast period, ”said Matthew Ryan. said a senior market analyst at global financial and currency risk management firm Ebury.
“This should translate to a midpoint that shows increases before the end of 2023 compared to the March projections which showed no increases until 2024,” Ryan said.
According to crypto-finance service provider Amber Group, there are concerns that the Fed is discussing the timing of slashing or scaling back emergency stimulus measures to increase liquidity launched a year ago. This is clear from the weak tone of gold, copper and other commodities ahead of the Fed, as Bloomberg noted.
Any hint of an anticipated cut or rise in rates could trigger risk aversion in financial markets, killing bitcoin’s nascent recovery. Alternatively, a firm commitment to keep the tap on would bring joy to bitcoin and asset prices in general.
Leading investors like Barry Silbert, co-founder and CEO of Digital Currency Group (the parent company of CoinDesk), expect stock market volatility to pick up again after the Fed meeting. Some of this could fuel the bitcoin market. “I hiked the VIX to prepare for the macro fireworks display,” Silbert tweeted Monday, referring to the Cboe volatility index.
“Basically we always see a downside risk [for bitcoin] coupled with an extended US equities correction and downside risk associated with regulatory headwinds, ”said Joel Kruger, currency strategist at LMAX Digital.
Bitcoin’s dominance rate
A sustained increase in the dominance rate of bitcoin, the highest share of cryptocurrency in total market capitalization is needed to confirm an uptrend reversal.
This is because the largest cryptocurrency by market value is usually the first to rally, followed by alternative cryptocurrencies (altcoins). In other words, money enters the world of crypto via bitcoin, as seen in October 2020, and passes into altcoins.
The dominance rate remains below 50% at time of publication, having peaked above 70% in early January, according to TradingView. According to analysts at JPMorgan, this bitcoin share is still quite low is a bearish sign.
Bitcoin dominance rate
Source: TradingView
“We believe that bitcoin’s share in the total crypto market should normalize and maybe exceed 50% (as in 2018) to be more comfortable saying that the current bear market is behind us,” the JPMorgan analysts led by Nikolaos Panigirtzoglou said in a memo released June 9.
Also Read: MicroStrategy Raises $ 500 Million From Bond Sale To Buy More Bitcoin – CoinDesk
Matthew Dibb, co-founder and COO of Stack Funds, said he expects Bitcoin’s share of the crypto market to increase in the coming weeks. “With the rotation of altcoins to bitcoin, as well as the impending purchase of large slices of Bitcoin by MicroStrategy, we may see the rate of dominance increase over the next few weeks, while altcoins lag behind.”
Key resistance still intact
While bitcoin has registered an impressive rally of relief to $ 40,000, it has yet to break through major price hurdles that could pave the way for a bullish rally.
“Ideally, for us to follow a bottom, we would like to see a weekly close above $ 41,000,” said Dibb of Stack Funds.
Simon Peters, crypto asset analyst on multi-asset investment platform eToro, also cited $ 41,000 as a level to beat. “We saw the price face resistance earlier in the year at this level as it traded around what was then an all-time high, and I would need to see a bigger rise to be bullish. as to picking up the price and maybe pushing over $ 50,000 and beyond, ”Peters said in an email.
Bitcoin: an obstacle of $ 41,000 still intact
Source: TradingView
Bitcoin briefly exceeded $ 41,000 on Monday before dropping back below $ 40,000, according to data from CoinDesk 20.
As Dibb and Peters watch $ 41,000, discussions on social media suggest that some in the investment community are focused on the 200-day simple moving average (SMA) hurdle, currently pegged at $ 42,604.
Also Read: Bitcoin Cash Outflow Slows But Investors Start Out Ether Fund Outflow
Delta Exchange CEO Pankaj Balani said the recent recovery from lows of nearly $ 30,000 could be a short-term respite. “The rebound could extend to $ 45,000, but the rise seems limited here, and we expect to see more sales occur at these levels,” Balani said during a WhatsApp chat.
[ad_2]
picture credit