While Bitcoin investors are stunned by the shock of recent crypto bankruptcies and banking problems, the strengthening US dollar could cause more problems. The good news is that investors continue to keep Bitcoin on the agenda despite its falling price. Technical analysis reveals that we can see sharp movements in both directions in this environment.
Social volume rises as Bitcoin price drops
Bitcoin (BTC) price dropped from $23,435 to $22,259 in an hour on March 3. Experts at crypto analytics platform Santiment noted that investors did not show serious concern until 12 hours after the price did not recover.
Interestingly, Bitcoin’s social volume has reached a two-week high after social media buzz about its potential to rally again. According to experts, social volume needs to rise even higher for the largest cryptocurrency by market cap to bounce back.
What trend do experts expect in Bitcoin price?
Arthur Hayes, former CEO of BitMEX exchange, described Bitcoin’s price movements in two scenarios. In the first scenario, the crypto market continues to rise smoothly and this momentum could support a gradual price increase in BTC price.
Hayes believes that Bitcoin has already bottomed out, “because almost every irresponsible person who could go bankrupt went bankrupt.” In this scenario, the crypto winter is finally coming to an end and BTC could return to $40,000 in late 2023. According to the analyst, in the second scenario, the crypto market will bottom out and 2023 will be as bad as 2022. Bitcoin price will continue to decline and the overall market will witness a sharp correction similar to 2022.
Strengthening dollar weakens Bitcoin’s $25,000 target
The US Dollar Index (DXY), which tracks the dollar’s performance against foreign currencies, rose 4% from 100.82 on 3 February on the expectation that the US Federal Reserve will continue to cool benchmark interest rates. However, cautious mood continues to prevail as fresh US inflation data shows that a recession is not yet imminent.
This includes the latest jobless claims, which fell 2,000 in the week ending Feb. 25 to a seasonally adjusted 190,000, and consumer spending strengthened in January. Meanwhile, 90% of US manufacturers surveyed by Bloomberg complain of rising input prices despite declining supply chain problems.
While the problem isn’t as severe as during the pandemic, Bloomberg’s poll shows that inflationary pressure hasn’t gone away despite the Fed’s aggressive rate hikes. “Recent data shows that consumer spending is not slowing that much, the labor market remains unsustainably hot, and inflation is not falling as fast as I thought,” Fed Chairman Christopher Waller said.
If these data reports continue to sound too hot, the policy target range will need to be raised further this year.
Can Bitcoin retest $20,000?
Stronger dollar prospects are weakening the strength needed by Bitcoin bulls to break the $25,000 technical resistance level. The price of BTC has dropped about 13% since then, and one of the main reasons for this was macro headwinds.
Moreover, the concerns about the crypto company Silvergate, which we refer to as Kriptokoin.com, and the possible consequences for the market have also kept the price under control over the past few days. “Any liquidity concerns will have a direct impact on market conditions and may affect the access and availability of some client funds,” says John Toro, head of commerce at cryptocurrency exchange Independent Reserve.
Technically, Bitcoin continued its short-term uptrend by holding strongly above two key EMAs: the 50-day EMA (red) at $22,500 and the 200-day EMA (blue) near $21,770. However, investors need to be wary of a potential break below the EMAs, where the price of BTC could retest the key $20,000 support level in the coming weeks, coupled with additional negative news from rising interest rates.
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