After bitcoin’s price recovered from its 2022 lows and hit about $25K per bitcoin earlier this month, investors and traders were more at ease. But the Bitcoin price has turned around, and the bulls have failed to drive the price higher. Many market participants now fear the worst selling is yet to come due to this.
On June 17 of this year, the price of Bitcoin hit a low of $17,581, marking the bottom of the market. Since the price had just broken through a significant support level of $20,000 and the next critical psychological support level was at $15,000, it was generally expected that the price might fall considerably lower. On August 18, however, the price quickly reversed course and hit a high of $25,177, the highest level in nine weeks.
Technically speaking, when the BTC price broke below the 50-day Simple Moving Average (SMA) on the daily time scale, bears were much more concerned. For traders, the 50-day simple moving average (SMA) is a key level to look at when trying to decipher the direction of the trend in the market. If the price is trading above this average, then bulls are in charge of the market, and the chances favour higher highs. When the price drops below this key moving average, it’s usually safe to assume that bears have taken control of the market.
Bitcoin is trading below its 50-day simple moving average but above its 200-day simple moving average. As a result, BTC bulls are still hoping that the recent breach is phoney, and if the price stays over $20,000, there is nothing to stop it from continuing its ascent.
If the price drops below $20,000, though, I anticipate volatile price movement, and it’s possible the bulls won’t be able to halt the sell-off until we’re approaching the year’s lows (mentioned earlier).
The $15k (psychological support) and $13mil ($13,198k) price points will be the primary emphasis and attract some offers (the low of Nov 2020). The price is close to $10,760, and many interested buyers will undoubtedly be (the low of September 2020).
Trading: What Can You Do?
If you are a HODLER and believe that Bitcoin is headed for the moon, you may not be too worried by the current price drop.
Are you concerned about the possibility of a decline in bitcoin’s value? Hedging your bets using Contract for Differences (CFDs) is one solution. Bear in mind that CFDs are a highly leveraged instrument and that shorting bitcoin calls for strict risk management, given that BTC is a unique beast that may continue to climb upward for a while. Specifically, there were no down months from October 2020 through March 2021, and the price increased from 10,760 to 61,693. However, CFDs allow investors and traders to borrow funds from a broker, allowing for a potentially more significant reward in the event of a successful transaction.
What To Be Mindful of?
Recently, the price of Bitcoin has developed a strong link with the Federal Reserve’s monetary policy, such that as the Fed tightens policy, the price of Bitcoin falls. This association between the Federal Reserve’s monetary policy and the price of Bitcoin has become stronger in recent times, and it’s a big reason why Bitcoin’s price crashed from its all-time high.
Going forward, traders may want to continue to watch this correlation closely as several Fed members will deliver their views of the monetary policy, which will likely influence the bitcoin price.