Key Bitcoin takeaways
- Bitcoin dropped on the first day of its new weekly session.
- The plunge appeared ahead of two key macroeconomic events: JOLTS job report on Tuesday and FOMC minutes on Wednesday.
- The $45,000-support hold BTC from falling towards $40,000.
NEW DELHI (CoinChapter.com) — Bitcoin (BTC) price finished weaker last week, dropping nearly 7% after failing to hold $50,000 as its technical support. Additionally, the volume backing the downside move appeared strong, underscoring a strong bearish sentiment in the market.
The problematic correction appeared despite Bitcoin price bulls claiming that it would reach $100,000 by the end of 2021. That did not happen majorly as the Federal Reserve switched its policy from very dovish to very hawkish, driven by fears of persistently higher inflation — take note that the U.S. consumer price index (CPI) surged to 6.8% in November, the highest in nearly four decades.
Bitcoin price grappled with the same hawkish sentiment entering 2022, which would have Fed withdraw its $120 billion a month asset purchase program entirely, followed by three rate cuts into the year.
BTC surged from below $4,000 in March 2020 to as high as $69,000 in early November against the same loose monetary policies. But as they disappear, they also take that excessive dollar liquidity from circulation that supported Bitcoin’s supersonic price rally.
That is why this week could turn out to be another seven days of consolidating/correcting BTC prices, thanks to some major macroeconomic developments unfolding. The first and foremost is the release of the Federal Open Market Committee’s (FOMC) minutes from their December meeting this Wednesday.
The interest rate scare
FOMC is expected to have discussed the timing of the Federal Reserve’s first and subsequent rate hikes in 2022. The sooner they come (many anticipate in March/April based on tapering’s end), the more they would strengthen the U.S. dollar by offering better yields on the government bonds.
Meanwhile, the Bitcoin price could avoid a serious correction if the Fed minutes show their likelihood of raising rates in June. Nonetheless, the U.S. central bank’s final decision will come based on the economy’s health, especially the labor sector.
That is why it is vital to track the JOLTS Job Openings report releasing this Tuesday. A number above the previous month’s 11.03 million would indicate a steady recovery in the U.S. economy. Meaning, it could prompt the Fed to delay its rate hike at least until June, which could support the Bitcoin price.
Conversely, a JOLTS reading below 11.03 million would increase the possibility of an earlier Fed rate hike, putting Bitcoin at risk of continuing its correction further lower.
BTCUSD price technicals
Technically, Bitcoin bears are not out of woods yet as the BTC price remains stuck inside a trading range, showing a short-term bias conflict among traders.
In detail, the BTCUSD exchange rate has been trending between its 20-week exponential moving average (20-day EMA; the green wave) near $51,000 and 50-week exponential moving average (50-day EMA; the velvet wave) around $45,000. But with Fed-related risks, the pair may break below the $45,000 support.
Should that happen, it would risk falling towards $40,000, which also serves as the 0.382 FIb line of the Fibonacci retracement graph from circa $65,000-swing high to almost $25,000-swing low. On the other hand, a rebound from $45,000 would have Bitcoin test $50,000 again for a potential breakout.