Bitcoin (BTC) continued its downward trend on Wednesday, ahead of the testimony of United States Federal Reserve chairman Jerome Powell.
The spot BTC/USD exchange rate fell to its 17-day low of $31,600 after an intraday dip of 3.46%. Meanwhile, CME futures linked to the pair fell 3.41% to $31,515, extending their week-to-date losses to 9.5%.
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By early July, Bitcoin had surged to $35,000 as bulls continued to defend support levels around $30,000 against any downside attempt.
Independent Market Analyst Will Clemente III noted that entities with low selling histories continued to absorb Bitcoin at lower levels from speculative traders, adding that the strategy is in the process of effectively removing a good BTC supply from the market.
“Given no capitulation event, in my humble opinion it is a matter of ‘when’ the re-accumulation process will be completed rather than ‘if’,” Clemente wrote.
“Once the process is complete, the market would experience a supply shock.”
Bitcoin sold for $35,000 and fell to nearly $31,500 during the Wednesday session. One factor that has made traders cautious is uncertainty about how the Federal Reserve would respond to the rise in inflation — now rising at its fastest pace in 13 years.
In detail, the US consumer price index (CPI) increased by 0.9% in June 2021 from the previous month and up 5.4% compared to June 2020. Higher inflation numbers sharpened the focus on Powell’s appearance before the House Financial Services Committee on Tuesday at 9:30 a.m. EST.
The head of the central bank expects to clarify his stance on the ongoing spike in consumer inflation. In his previous statements, Powell has suggested that the Fed should act cautiously unless it sees a “maximum recovery” in US labor markets.
Therefore, with the support of a number of like-minded, dovish Fed officials, including John Williams, the head of the New York branch, Powell could ignore the Fed’s $120 billion monthly asset purchase program in the US. aftermath of strong US growth and high inflation.
Fed’s aggressive tone coincides with lower BTC prices
Meanwhile, Evercore ISI economist Peter Williams predicted that rising CPI values would increase tensions between members of the Federal Open Market Committee.
He noted that some aggressive members could demand that the tapering start as early as September, but added that the Fed would generally adopt a wait-and-see attitude, assuming inflation is transitory.
As for Bitcoin, the outlook remains mixed, especially after the cryptocurrency failed to respond to inflation alarms in recent months, China’s crackdown on the crypto sector, increasing regulatory oversight, the Fed’s 2023 rate hike plans and anti-crypto cryptocurrencies. tweets from Elon Musk.
Fortune reported that Bitcoin is marching “on its own drummer” ignoring recent spikes in key inflation stats. That makes the cryptocurrency a questionable hedge against rising consumer prices.
Joel Kruger, a forex strategist at London-based investment firm LMAX, thinks otherwise. The analyst noted that Bitcoin’s long-term outlook remains skewed, as there is a “legitimate fear of rising inflation.”
“Setbacks more on SOME investors who view Bitcoin as a risk-correlated emerging asset,” he said tweeted Tuesday late.
“In the short term, there could be more pulling down as stocks plummet. But ultimately Bitcoin should be well supported in the longer term value proposition.”
In addition, Greg Waisman, co-founder and chief operating officer of cryptocurrency infrastructure company Mercuryo, offered a more critical view.
First, he noted that macro investors don’t believe in Bitcoin’s true value, even with rising inflation. And second, he projected Ether (ETH) as a better cryptocurrency, given the recent run-up against Bitcoin.
“Bitcoin is the most expensive and well-known cryptocurrency, but it is not a cryptocurrency of the present,” Waisman explained, adding:
“Ethereum is the true king of cryptocurrencies. Investors will continue to drive Bitcoin high and dump at their leisure. That said, Bitcoin will again cross $50k.
Currently, the lackluster volumes and a two-month-old downward movement continue to keep Bitcoin in a bearish state.
Since May 20, the BTC/USD exchange rate has been trending down in a bearish parallel channel, bouncing back from the support trendline and pulling lower when testing the resistance. At the same time, the $30,000 to $32,000 area has created a confluence of additional support.
The pair appears to be moving back to the lower trendline after the last retest of the Channel’s upper trendline. However, the short target in the current scenario is less than $30,000 (towards the Q2 bottom of $28,732).
Conversely, a breach north of the channel’s resistance trendline could cause BTC/USD to test the 50-day simple moving average (50-day SMA; the blue wave) at $35,363 as the next upward target. The area has witnessed sales in recent sessions.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move carries risks, you should do your own research when making a decision.
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