Bearish view
- Sell the BTC/USD pair and set a take-profit at 90,000.
- Add a stop-loss at 100,000.
- Timeline: 1-2 days.
Bullish view
- Buy the BTC/USD pair and set a take-profit at 100,000.
- Add a stop-loss at 90,000.
Bitcoin, the biggest cryptocurrency, remained in a tight range as investors waited for a catalyst. The BTC/USD pair traded at 97,323 on Tuesday morning, where it has remained in the past few days. It has dropped by 11% from its highest point this month, meaning that it is in a correction.
Bitcoin’s wavering happened as the US dollar index and American equities rose after Donald Trump continued its trade war. He announced that the US would impose tariffs on steel and aluminium.
These tariffs will have two major implications, including high inflation and slow economic growth. A 25% tariff on the two metals means that companies will be forced to implement higher prices on key items like vehicles and construction materials.
These actions may lead to stagflation, a period characterized with high inflation and low economic growth. Stagflation is a complex period because the Fed does not have an easy way out. In theory, cutting rates to stimulate the economy would lead to high inflation, while hiking rates to lower inflation would affect the economic growth.
Bitcoin and other risky assets like stocks tend to underperform the market when there is increased volatility.
The key catalyst for Bitcoin and other risky assets will be the first day of Jerome Powell’s testimony to Congress. In it, he will be pressed about Donald Trump’s policies, their impact on the economy and what the Federal Reserve will do.
The US will publish the closely-watched inflation data on Wednesday. These numbers will likely have a big impact on the economy and the next Fed action. Bitcoin may rise of the data shows that inflation dropped in January.
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BTC/USD technical analysis
The BTC/USD pair has remained in a tight range in the past few months. Bitcoin remains significantly below the year-to-date high of $109,200. It has also moved below the 50-day Exponential Moving Average (EMA).
The pair has moved to the weak, stop & reverse point of the Murrey Math Lines (MML). It has dropped below the Ichimoku cloud indicator and remains slightly above the 23.6% Fibonacci Retracement level.
Bitcoin has formed a double-top pattern at 108,320, a high-risk chart pattern. Therefore, the pair will likely have a bearish breakdown, with the next target to watch being at 90,000, the top of trading range of the MML. A move above the ultimate resistance at 100,000 will point to more gains.
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