Bearish View
- Sell the BTC/USD and set a take-profit at 18,000.
- Add a stop-loss at 21,000.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 21,000 and a take-profit at 22,000.
- Add a stop-loss at 18,000.
The BTC/USD pair retreated as the fear and greed index and American shares pulled back. Bitcoin is trading at the important support level of $20,000. This price is slightly above the year-to-date low of $17,657.
Three Arrows Capital Liquidation
The cryptocurrency industry has been under intense pressure in the past few months as demand for the coins waned. The total market cap of all coins has tumbled from more than $3 trillion in November last year to less than $1 trillion.
This decline is mostly because of the changing market conditions as the Federal Reserve and other central banks embrace a more hawkish tone. The Fed has hiked rates about 150 points this year and there are signs that more hikes are on the way. It has also started winding down its large balance sheet.
In a statement on Wednesday, Powell argued that the bank is pricing in a situation where the rising rates will lead to a recession. Historically, Bitcoin tends to underperform in a period of high-interest rates.
Meanwhile, the BTC/USD pair declined due to the strong US dollar. The dollar index rose by 0.53% to $104.8 after the hawkish statement by the Fed chair. At the same time, bond yields rose as investors anticipated more rate hikes.
Another reason why Bitcoin dropped was the news that Three Arrows Capital will be liquidated. A British Virgin Islands court said that the action was necessary for the hedge fund to pay its debt. At its peak, Three Arrows had over $10 billion in assets under management. Some of those funds were invested in Luna, the cryptocurrency that crashed in May.
Investors are also getting fearful about the market. The closely watched volatility index (VIX) rose by more than 5% while Bitcoin fear and greed index retreated to 12.
BTC/USD Forecast
The BTC/USD is trading at the important support level of 20,000, which was the lowest point since June 22nd. On the four-hour chart, it has moved below the 23.6% Fibonacci retracement level. It has also moved inside the Ichimoku cloud while the Relative Strength Index (RSI) is approaching the oversold level.
Therefore, the pair will likely have a bearish breakout as sellers target the key support level at 18,000. This view will be confirmed if it manages to move below the Ichimoku cloud and the support at 19,816.
