Bearish view
- Sell the BTC/USD and set a take-profit at 40,287 (S1 of standard pivot point).
- Add a stop-loss at 47,104 (25th April low).
- Timeline: 1 - 2 days
Bullish view
- Set a buy-stop at 47,104 and a take-profit at 50,000.
- Add a stop-loss at 45,000.
The BTC/USD price declined sharply during the weekend as investors continued worrying about high-interest rates and Tether. Bitcoin price is trading at $44,487, which is 31% below its all-time high of $65,000.
Tether concerns
Bitcoin prices declined after Tether reported its composition. As of March 31st, Tether’s assets were backed by cash and cash equivalents and other short-term deposits and commercial paper to the tune of 75.85%. A closer look at the report shows that only 2.9% of these reserves are cash reserves.
In its marketing, Tether has always said that its reserves were backed 100% by cash, raising concerns about the strength of the stablecoin. This was a major issue since Tether is the biggest stablecoin in the world. Also, in the past, developers were criticized for manipulating Bitcoin prices.
The BTC/USD is also declining as investors continued worrying about interest rates as inflation rises. Last week, data by the United States showed that consumer and producer inflation rose sharply in April. This performance was mostly because of higher commodity prices and the recent stimulus package by the United States.
Further numbers showed that the labor market was starting to tighten. For example, the number of initial jobless claims dropped last week while more companies like Mcdonald’s have started to increase their salaries in order to attract workers. Therefore, a combination of higher inflation and tightening the labor market means that the Federal Reserve may be forced to intervene by tightening.
As such, the concern is that Bitcoin and other cryptocurrency prices could start declining as the monetary situation tightens. Furthermore, the recent rally has been credited to the actions by the Federal Reserve. In response to the pandemic, the bank slashed interest rates to zero and started a major quantitative easing operation that pushed its balance sheet to more than $7.8 trillion.
BTC/USD analysis
The four-hour chart shows that the BTC/USD price has been in a steep downward trend. The pair is trading at the lowest level since March. In the overnight session, it moved below the important support at $47,100, which was the lowest level this month. The downward trend is being supported by the 25-day and 50-day exponential moving averages (EMA). Therefore, bears seem to be in control, which could see them retest the next support at $40,287, which is the first support of the standard pivot points.
