Bitcoin’s burst above $42,000 was brief, prompting some analysts to argue that swing trading BTC’s range is the best option for the time being.
Before dropping back below $40,000 during the evening trading hours, the price of Bitcoin (BTC) showed bullish for a moment, likely misleading numerous traders into establishing long positions. Let’s analyze what investors are saying about the existing market movement and whether today’s quick breakthrough was just an overhead resistance test.
Is Resistance Staying at the Key Moving Average?
Pseudonymous Twitter user and cryptocurrency trader ‘Rekt Capital’ addressed Bitcoin’s weekly price movement, stating that “Bitcoin is now hovering below the green 21-week and blue 50-week bull market exponential moving averages (EMA).”
Rekt Capital also mentioned, “Breaks beyond these EMAs have preceded immense upside. Turn these Bull Market EMAs into support, and we’ll see Bull Market momentum resume.”
Does Bitcoin’s Connection to Tech Stocks Offer Any Insight into the Matter?
Despite all of the macro forces impacting financial markets globally, David Lifchitz, chief investment officer and managing partner of ExoAlpha, says Bitcoin is locked in the midst of its $35,000 – $45,000 band. Bitcoin has acted more like risk assets than inflation hedges, according to Lifchitz.
The closely connected price behavior of Bitcoin and Nasdaq over the last few months provides evidence for this.
Lifchitz believes that, if Bitcoin’s “correlation with speculative tech stocks” continues to run high, the US Federal Reserve’s projected cycle of interest rate increases will “become toxic to risk assets” at some time, resulting in Bitcoin price falls.
Ultimately, Lifchitz advises that Bitcoin needs to be aggressively traded while it increases and decreases rapidly in this range for traders who believe in the long-term potential of this cryptocurrency.
Should People Watch Out for the $42,000 Level Again?
Analysts believe that the $42,300 mark is a critical level to keep an eye out for. Michael van de Poppe, an independent analyst, is just one person who believes that this is a critical point that the digital asset needs to overcome. He believes that once Bitcoin makes it through that point, the new test levels are going to be around approximately $46,000, with the potential for it to hit the $50,000 mark.
Pseudonymous Twitter user and analyst ‘Plan C’ revealed more evidence that Bitcoin could soon move even higher when he or she posted a chart that shows the convergence of numerous analytical indicators for the BTC price.
Plan C said, “The last 4 times the blue & purple lines were below the green line for this long the Bitcoin bottom was already in.”
With all this information, keep in mind that the current overall market cap is now sitting at $1.881 trillion, while BTC’s dominance rate is standing at 41.2%.
Could This Dip Have Anything to Do with Comments Made by the Fed?
Federal Reserve Chair, Jerome Powell, stated on Thursday that hiking the benchmark interest rate by 50 basis points (0.5 percent points) for the next Federal Open Market Committee meeting being held in May “will be on the table.” Tighter monetary policy has hampered speculative assets such as cryptocurrency and stocks so far this year.
We saw Bitcoin back away from its $42,965 high after this statement was made, despite the signs of the coin gaining momentum. Hence, these comments may have impacted traders’ thoughts on the movement of the asset.
On Thursday, alternative cryptocurrencies (altcoins) maintained the lead over Bitcoin, showing that traders have a higher appetite for risk. Tron’s TRX coin, for instance, has increased by 14 percent in comparison to Bitcoin’s flat performance during the same time period. On Thursday, the GRT token of the Graph surged by as much as six percent.
Furthermore, stocks were neutral on Thursday, while the 10-year Treasury yield increased to 2.9 percent as investors braced for rising interest rates.
In theory, altcoin season is validated when 75% of all cryptos outperform Bitcoin during the same time span. Because it’s too late to plan for a rise by then, a reading above 50% could indicate a shift in traders’ opinion from pessimistic to positive.
Despite this, only 41% of the top cryptos have outpaced Bitcoin in the last year.