Bitcoin price fell to the important support level at $19,160 due to concerns about the strength of the US dollar and higher interest rates. BTC/USD is down more than 60% from its highest level this year. Similarly, the BTC/GBP and BTC/EUR prices have fallen much more.
strong us dollar
For a long time, Bitcoin has had an inverse relationship with the US dollar. In most cases, Bitcoin tends to rally when the USD pulls back and vice versa. This trend has occurred this year, with Bitcoin falling by more than 60% and the closely watched US Dollar Index (DXY) rising by more than 20%.
The US dollar index has risen sharply as its constituent currencies, such as the euro, pound and Japanese yen, have plunged to the lowest level in years. At the same time, other assets priced in US dollars, such as the Dow Jones, the Nasdaq 100 and the S&P 500, have collapsed this year.
The DXY index has risen mainly due to the actions of the Federal Reserve. In a bid to rein in runaway inflation, the bank has embarked on its most aggressive tone in decades. It has raised interest rates by 300 basis points this year and analysts believe the bank will deliver at least a 125 basis point hike this year.
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In most periods, higher interest rates tend to drive investors away from risky assets like tech stocks and cryptocurrencies. Additionally, investors can now receive a 4% return for just buying a 2-year government bond. BTC will therefore react to the upcoming FOMC minutes
The next key catalyst for Bitcoin price will be the upcoming US inflation data scheduled for Wednesday. Analysts believe that headline and core inflation metrics diverged in September. They expect inflation to fall from 8.3% to 8.1% while the core CPI rose from 6.3% to 6.5%. Higher inflation rates will drive more investors away from Bitcoin and other currencies.
Bitcoin Price Prediction
The daily chart shows that the BTC/USD price has been trending slowly down for the past few days. In this period, the coin has moved to the lower side of the ascending channel shown in black. Notably, Bitcoin is a few points above the important support level of $17,581, which was the lowest level this year.
Therefore, I think this price action is a calm before the storm for Bitcoin. A clear break below the lower side of the channel will indicate that the bears have prevailed. Such a breakout will see the coin crash to the next support at $17,581, which was the YTD low.
An alternative is where the coin resumes the uptrend and retests the upper side of the channel at $20,500.