Bearish View
- Sell the BTC/USD pair and set a take-profit at 37,000.
- Add a stop-loss at 40,000.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 38,600 and a take-profit at 40,000.
- Add a stop-loss at 37,000.
The BTC/USD pair continued to recoil as investors continued to worry about several factors such as inflation and tight monetary policy. The pair is trading at about 38,200, which is slightly below the important support level at 40,000.
Fed Decision Ahead
Bitcoin has been range-bound as other financial assets have sold off. For example, global bonds declined sharply this week, with the yield of the US 10-year and 30-year Treasuries crossing the psychological level of 3%. Bond yields have an inverse relationship with price.
A closer look at on-chain data shows that most holders are currently peering into the abyss of holding unprofitable positions. According to Glassnode, the proportion of Bitcoin held in profit is about 70%. This means that about 30% of all Bitcoin holders are currently at a loss. Therefore, if Bitcoin continues falling, there is a likelihood that some holders will start selling.
At the same time, long-term holders have been unfazed, with the Value Days Destroyed hovering near its lowest levels in more than a year. Data by Glassnode shows that short-term price action and network profitability is a bit bearish while long-term trends are a bit positive.
The next key event to watch will be the interest rate decision by the Fed that is scheduled for later today. Economists expect that the bank will continue hiking interest rates in this meeting. The consensus is that it will hike rates by about 0.50% for the first time in years. Most importantly, the bank will also start gradually reducing its balance sheet by about $75 billion per month.
A hawkish Fed should be negative for Bitcoin and other risky financial assets. However, a contrarian case can be made, where the price will bounce back since the situation has already been priced in.
BTC/USD Forecast
The BTC/USD pair has been in a tight range in the past few days. It is trading at about 38,200, which is lower than this week’s high of 39,200. It has also dropped below the 25-day moving average while the Relative Strength Index (RSI) and the Stochastic Oscillator have pointed downwards. The pair is also between the descending channel shown in black.
Therefore, there is a likelihood that the pair will continue falling as bears target the lower side of the channel at about 37,000.
