The fundamental challenges facing the crypto market have all given the word to act in concert, the issues of fund security, legal, regulatory, judicial, inter-asset class correlation and restrictive monetary policy. Faced with these combined and virulent attacks, the price of bitcoin is very much alone on its major graphic support of 24,000/25,000 dollars.
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The FED Terminal rate could be 5.75%
Cryptoast columns have described and still describe to perfection the endogenous difficulties that the crypto market has been facing in recent weeks. These are illustrated by the resurgence of fund security issues, regulatory and even legal issues resulting from the crusade of the American stock market regulator, the Securities and Exchange Commission (SEC).
This first dimension of the difficulties unfolds over a medium/long term perspective and will be resolved over the next few months, or even longer. We stand here the first and probably the main reason why the price of cryptos has fallen since the beginning of May (Sell in May and Go Away, you said ?).
As the Bitcoin (BTC) has in the belly, it must also face a context of financial markets and monetary policy of confirmed intransigence with in particular the rebound of the US dollar and market interest rates since the middle of April.
It is true that the latest monetary policy decision by the Federal Reserve (FED) taken this week has dampened the “hopes” of a rapid pivot from the American Central Bank. The latter recalled that the current level and trend of core inflation measures were still far too highdespite the leading inflation indicators which are still pointing to an upcoming fall in inflation rates over the coming months.
But the Fed, for its part, will only be satisfied and fully satisfied when the underlying consumer inflation rate will be well established below the 2% threshold and we are still far from it. This is how it communicated to the market that its so-called “terminal” rate would probably be 5.75%, ie another 1 to 2 rate increases this summer.
If you add to this that stock indices are now technically overbought, you get a set against which Bitcoin will have to exert all its forces to see its price stabilize.
Graph made with the TradingView site and which shows the following information: the Fed funds interest rate, the most probable FED Terminal rate, the FED balance sheet and the ECB balance sheet
Table taken from the CME FED WATCH TOOL tool and which gives the probability of action by the FED during its next monetary policy meetings
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Bitcoin is at the touch of the medium-term chart pivot
The bitcoin price therefore currently has (almost) no allies to defend a decisive technical support zone, the one we talk about here every week and which constitutes the graphic border between two worlds.
The first world is the annual uptrend, the one that saw the market rebound from $15,000 to $31,000 and could be the first leg of the new bull market.
The second world which on the contrary interprets this rebound as an intermediate stage in the large bear market initiated in November 2021 at 70,000 dollars and whose final target is at 10,000/12,000 dollars.
This chart boundary is at $24,000/$25,000, this weekend’s weekly close will provide the answer.
Chart made with the TradingView site and which juxtaposes the weekly Japanese candles of the price of BTC / USD
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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