The calm in the financial markets is deceptive. Those who lost interest in bitcoin because it fell into the 5.4% trading range, the narrowest since October 2020, can eat their hearts out. The nature of the market is such that consolidations are replaced by trends, and vice versa. And the longer this or that asset is traded in a narrow range, the more explosive its further rally promises to be. Or, conversely, collapse. In the case of BTCUSD, the pendulum could have swung either way, but the fall in the US dollar inspired the token to surge.
Looking at the peak of the leader of the cryptocurrency sector to the very bottom since mid-June, the "bears" rubbed their hands. In their opinion, the decline in miners' incomes to the lowest level in the last two years due to increased competition, increased electricity costs, and the crypto winter should have forced them to sell tokens to cover the costs.
On the contrary, BTCUSD bulls pointed to the rise in the ratio of open interest in perpetual swap contracts for crypto assets to the number of coins held in reserves on exchanges, or the so-called leverage ratio, to record peaks. Despite bitcoin's 70% drop from its November highs, interest in it is still high. So, prices will rise, you just need to wait for the right moment.
Dynamics of Bitcoin and Leverage Ratio
The problem is that no matter how much the fans of crypto assets would like to live an independent life, it will not work. Big money has long entered the market, which perceive bitcoin as a risky instrument, and the fate of such assets depends on the Fed and its monetary policy. In this regard, the fall of BTCUSD against the backdrop of Jerome Powell's hawkish rhetoric in Jackson Hole and the growth of the pair's quotes on expectations of a slowdown in US inflation look logical.
Comments from FOMC officials, determined to fight the highest prices in decades and willing to sacrifice the labor market and the economy to do so, raised the chances of a federal funds rate hike by 75 bps in September to 86%. Large banks added fuel to the fire. Goldman Sachs and Nomura have changed their forecasts for the trajectory of borrowing costs. They see them up 75 bps in September and by 50 bps in November, up 25 bps higher than previous ratings. The cycle of monetary restriction will certainly not end there.
However, according to the market, the figure of 86% is too high. It will certainly fall if US inflation continues to slow down in August from 8.5% to 8.1%, as Bloomberg experts predict. This circumstance makes it possible to sell the US dollar and buy risky assets, including US stocks and bitcoin.
The markets are again going against the Fed, which they managed to do momentarily in the summer. I believe that history will repeat itself, so the potential for a BTCUSD rally seems limited.
Technically, on the daily chart, consolidation above fair value at 20,000 amplifies the risks of a pullback. Start selling the token on the rebound from resistances at 21,500, 22,300 and 23,150.
Relevance up to 10:00 2022-09-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.