Bitcoin prices have encountered some turbulence lately, falling below $19,000 earlier this week and then bouncing back.
Today, the cryptocurrency has been relatively stable, trading between $19,000 and $19,500 on TradingView.
Following these latest price movements, where is the digital currency headed next?
Delving into this matter, analysts emphasized the crucial role played by macroeconomic developments such as inflation, central bank policy and the U.S. dollar’s recent appreciation.
In addition, they identified important levels of support and resistance that technical traders can watch going forward.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Central Bank Policy
The European Central Bank opted to increase its three important interest rates, one which governs deposits and the other two which involve short-term lending, by 75 basis points today.
The financial institution’s Governing Council, which is responsible for creating monetary policy for the euro zone, further indicated that it anticipates pushing these rates higher “over the next several meetings.”
The Federal Reserve has hiked its benchmark rate significantly over the last several months, and market participants are more than 80% confident that the financial institution will announce another 75 basis-point rate hike at the next policy meeting, according to survey data provided by the CME FedWatch Tool.
Another significant macroeconomic development is the recent strength in the U.S. Dollar Index (DXY), which measures the purchasing power of the greenback relative to other fiat currencies.
Within the last week, this index reached a reading of 110.68, its highest in more than 20 years. Since then, the measure has retained much of its strength, trading north of 109.00.
“Bitcoin is being hurt by the rising Dollar Index (DXY),” emphasized William Noble, the chief technical analyst of research platform Token Metrics.
“I would imagine if DXY consolidates, BTC could move higher,” he added.
Key Technical Levels
After highlighting these crucial macroeconomic developments, market observers pinpointed important areas of support and resistance that traders should monitor.
“The next lower resistance level stands at the high $18k and if breached, the mid $18k could accelerate selling pressure for BTC, as mid $18k was the last low price drop before BTC recovered to above $20k,” said Armando Aguilar, an independent cryptocurrency analyst.
“The upper resistance level is seen in the mid $20k, where BTC stood beginning September,” he added.
Noble also weighed in on the matter.
“I don’t see bitcoin going lower than 18k, unless there is a crypto ‘black swan’ and everybody dumps bitcoin to buy Ethereum after the merge,” he stated.
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, shed additional light on the situation.
“The June lows around $17,500 is certainly a support level to watch as we creep closer to it,” he stated.
“If we hold those June lows, there is resistance at the $25,000 level,” said Sifling.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.