Bearish View
- Sell the BTC/USD pair and set a take-profit at 35,000.
- Add a stop-loss at 41,000.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 40,000 and a take-profit at 43,000.
- Add a stop-loss at 37,000.
The BTC/USD pair declined below the important support at 40,000 as the cryptocurrencies and stocks sell-off continued. The pair fell to a low of 38,677 on Monday, which was the lowest level since March 15th. It has fallen by over 15% from its highest level this month.
Bitcoin Demand Waning
The BTC/USD pair has declined as investors move to the safety of the US dollar. Indeed, the dollar index has been in a strong bullish trend in the past few weeks. It has risen to above $100.60, which is the highest it has been since March 2020. The dollar index has jumped against most currencies like the euro, sterling, and Japanese yen.
Bitcoin’s downward trend is also because of the ongoing rising bond yields as investors expect that the Federal Reserve will be more hawkish. Minutes published last week revealed that most officials were expecting that the bank will deliver several 0.50% rate hikes this year. They also expect that the bank will start a quantitative tightening (QT) policy.
Historically, stocks and other riskier assets tend to decline or underperform when the Fed embraces a hawkish tone.
Another reason why the BTC/USD pair has declined is that Bitcoin demand has dried in the past few days. On-chain data shows that there have been limited Bitcoin buyers in the past few weeks. Instead, holders took the rally that happened in March to exit their positions. At the same time, balances in exchanges like Binance and Coinbase have been in a downward trend.
BTC/USD Forecast
The daily chart shows that the strong Bitcoin recovery found a strong resistance at 48,300 in March. A closer look shows that the pair has managed to move below the upper side of the ascending channel that is shown in black. On Monday, it even moved below the lower side of this channel.
The BTC/USD pair also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) remains below the important level at 50. The MACD has also continued dropping.
Therefore, there is a likelihood that the pair will continue falling as bears target the key support level at 35,000. A move above the resistance at 41,000 will invalidate the bearish view.