Bitcoin, the number one cryptocurrency, has seen a slight uptick in its price in the past 24 hours, with bulls successfully defending critical support. However, recent data suggests that the digital asset is likely to experience further sideways price action. This article will examine the current state of the Bitcoin market and its correlation with macroeconomic forces.
As of this writing, Bitcoin is trading at $29,400, registering a 2% profit in the past day. Over the past week, the cryptocurrency has recorded similar profits, while other assets in the market have stalled or suffered losses. Despite these gains, Bitcoin has struggled to breach the key resistance level of $30,000 in recent attempts.
Over the past two years, the price of Bitcoin has shown a strong correlation with macroeconomic forces, particularly the actions of the U.S. Federal Reserve (Fed) and its interest rate hike program. Currently, the Federal Reserve is entering a quiet period due to summer vacations, leading crypto analysis firm Blofin to predict that Bitcoin and the wider crypto market will likely remain within their current range until September.
During this period, both price movements and volatility are expected to decline as low liquidity in the market affects price action, and institutional investors hedge their positions. Blofin suggests that potential interest rate hikes are already factored into the market and may not be enough to push Bitcoin above the $30,000 resistance level. This macroeconomic landscape could persist until May 2023, when inflation, the primary reason for the interest rate hikes, becomes more challenging to control.
The lack of liquidity in the market has had a noticeable impact on investor behavior. According to Blofin’s report, trading volume on crypto exchanges has been steadily declining since July 2022, reflecting investors’ reduced interest in engaging with cryptocurrencies. In fact, Bitcoin has experienced intraday price movements of only around 0.1%, an unprecedented level of stability for the digital asset over an extended period.
Many investors are now content with staying on the sidelines and holding their positions, given the current market conditions. The lack of trading activity suggests a lack of confidence in the price breakout potential of Bitcoin and other cryptocurrencies. Blofin suggests that this sentiment, coupled with the lack of significant bullish strength in both Bitcoin and Ethereum, is likely to result in a price dip in the near future.
Based on the analysis provided by Blofin, it appears that Bitcoin and Ethereum are facing an invisible ceiling around the $30,000 and $2,000 price levels, respectively. Despite brief moments of upward momentum, both assets are expected to hover around these levels for some time before experiencing a price decline. The report hints at the possibility of a breakout, but notes that it has not materialized thus far.
Bitcoin’s recent price action and its correlation with macroeconomic forces, particularly the actions of the U.S. Federal Reserve, provide valuable insights into the current market conditions. With low liquidity impacting price movements and investor behavior, Bitcoin and other cryptocurrencies are likely to experience further sideways price action in the coming months. While a potential price dip looms, the market is eagerly awaiting any developments from the U.S. Federal Reserve that could affect interest rates and create more risk appetite across the sector.
Cover image from Unsplash, chart from Tradingview.