The pair will remain in a bearish trend so long as it is below the 23.6% retracement and the descending trendline.
- Set a sell-stop at 35,000 and a take-profit at 33,000.
- Add a stop-loss at 39,000.
- Timeline: 1 day.
- Set a buy-stop at 38,000 and a take-profit at 39,000.
- Add a stop loss at 37,000.
The BTC/USD staged a major relief rally on Wednesday as investors reacted to the news from El Salvador. Bitcoin rose from $31,000 on Tuesday to $37,665.
Bitcoin Bounces Back
The BTC/USD rallied as traders reflected on news that El Salvador had made the currency a legal tender. This means that people in the country will have the freedom to use the currency in their day-to-day activities. For example, they will be able to pay bills and taxes using the coin.
However, there are several concerns. First, El Salvador is a small country that has a GDP of about $27 billion and a relatively small population. As such, analysts believe that the volume of Bitcoin used in the country will remain low in global standards. Second, it is unclear whether many businesses will start accepting Bitcoin, a currency known for its volatility. Third, there are concerns about whether more countries will follow in the country’s footsteps.
The BTC/USD also held steady after it emerged that JBS paid $11 million in Bitcoin as a ransom. This was substantially bigger than the $4 million that Colonial Pipeline paid the hackers. Therefore, there are concerns that the American government will start implementing regulations on cryptocurrencies. Such regulations are often seen as being negative for Bitcoin.
The BTC/USD will today react to the US inflation data. Analysts believe that the headline Consumer Price Index (CPI) rose to 4.7% in May. They also see the core CPI rising from 2.3% in April to 3.4% in May. This annualized increase will be because consumer prices fell sharply in the first months of the pandemic. It is also because the price of most things has gone up because of logistics issues and the rising consumer prices.
BTC/USD Technical Outlook
The four-hour chart shows that the BTC/USD pair rose to above 37,000 after the El Salvador decision. The pair is slightly below the descending channel that connects the highest levels since May 21. It is also slightly below the 23.6% Fibonacci retracement level while volume has continued to decline. It has also moved slightly above the 25-day and 50-day moving average.
Therefore, the pair will remain in a bearish trend so long as it is below the 23.6% retracement and the descending trendline. As such, we can’t rule out a situation where it erases some of the gains made yesterday.