Bearish view
- Sell the BTC/USD pair and set a take-profit at 19,700.
- Add a stop-loss at 22,500.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 21,800 and a take-profit at 22,500.
- Add a stop-loss at 20,000.
The BTC/USD price declined sharply as concerns about the global economy continued. Bitcoin dropped below the important psychological level of $21,000, which was sharply lower than this month’s high of over $25,000.
Volatility and US dollar rises
The BTC/USD price declined sharply in the overnight session as global volatility rose sharply. The closely watched CBOE volatility index soared by more than 17% in the overnight session. In the same period, the US dollar index surged to over $109, which was higher than this month’s low of about $104.
The dollar index has surged in the past few days as Federal Reserve officials warned that they will continue hiking interest rates and implementing quantitive tightening even as inflation cools. Last week’s minutes hinted that the bank will hike by 0.50% in the coming meeting.
The BTC/USD sell-off coincided with the sharp increase of US Treasury yields. The yield of the 10-year yield surged to above 3% for the first time in weeks. Bond yields have an inverse relationship with their price movements.
At the same time, American indices like the Dow Jones, Nasdaq 100, and S&P 500 all dropped by more than 2% in the overnight session.
The same sell-off happened in other assets as well. For example, the prices of key commodities like crude oil, copper, gold, and silver declined. The sell-off also happened after signs of a recession continued to emerge.
For example, the Chinese central bank decided to slash interest rates for the second time since May this year. This happened after a series of weak economic data from the country and signs that the housing market was struggling. In addition, the UK Office of National Statistics (ONS) showed that the country’s economy contracted at a faster pace than expected in 2020.
BTC/USD forecast
The four-hour chart shows that the BTC/USD price found a strong resistance level at 25,258. It then dropped sharply and invalidated the ascending triangle pattern that is shown in purple. It moved below the 25-day and 50-day moving averages. The pair moved below the standard pivot point.
Therefore, the pair will likely keep falling as bears target the first support of the standard pivot point at 19,780. A move above the resistance point at 22,000 will invalidate the bearish view.
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