#Bitcoin #BitcoinPrice Analysis — #BTC Unwinds Yesterday’s Reactionary Surge To Highest Interest Rate Hike Since 1994 — Are we Heading beneath $20,000?

Key highlights:

• Bitcoin is down by a steep 7% today as it battles with $21,000.
• BTC/USD surged yesterday in a reactionary rally following the interest rate hikes but has since unwound all of the gains.
• The FOMC announced a 75 BPS Interest Rate hike — the highest hike since 1994.

*Price at the time of publication

Bitcoin is down a steep 7% since the start of the day as the cryptocurrency begins to trend back to $20,000. The coin has seen a disastrous week of trading in which prices have dropped by around 30%. The recent price drop has caused BTC/USD to now sit a total of 70% off of its previous all-time high price at $68,770.

Today’s selloff comes after the market witnessed a reactionary rally to the latest interest rate hike announcement by the Federal Open Market Committee yesterday. The announcement stated that a 0.75% interest rate increase would come this month, the highest interest rate hike since 1994. 

Bitcoin gained 10.5% on the announcement, with Ethereum surging by a further 15%. A similar theme occurred in May when the FOMC announced a 0.5% interest rate hike. The market saw a brief reactionary rally before the bearish pressure returned to the market to drag it lower.

The Federal Reserve is choosing to continue to raise interest rates to help battle rising prices. Last week, the CPI figures showed that the inflation for consumer prices was sitting at a 40-year high. As a result, the Fed is deciding to move swiftly by increasing rates to get ahead of inflation to regulate prices. 

Rising interest rates make money more expensive to borrow. As a result, consumption tends to fall, and people save more — resulting in a slow down of the economy and a return to baseline prices for goods.

With the slowdown in economic growth on the way and a recession on the cards, it seems that long-term holders are starting to capitulate. Recent spot exchange inflows suggest that older coins are on the move;

Image source: CryptoQuant

The chart above shows the spot exchange inflows CDD, and it signals that lots of the coins coming into exchanges are older coins, meaning long-term holders are starting to feel nervous and are starting to move assets to exchanges to be ready to be sold.

With the market continuing not to indicate its next direction, let us take a closer look at the charts and see the potential areas of support and resistance moving forward.

Bitcoin Price Analysis

BTC/USD Daily Chart

Image source: TradingView

BTC/USD 4-Hour Chart

Image source: TradingView

What has been going on?

The daily chart above provides a clear perspective of the market’s pain this week. After holding above the June 2021 low at $28,650 during the second half of May, Bitcoin would lose this strong support at the start of this week. 

As soon as BTC slipped beneath $28,650 on Sunday, it started to tank pretty quickly as the week progressed. By the closing time on Monday, Bitcoin had already plummeted beneath the May 2022 lows at $25,484 and continued to break beneath the December 2020 support to hit $22,000.

However, the pain did not stop there. Looking at the 4-hour chart, we can see the choppy price action over the past two days alone. Yesterday, BTC dropped as low as $20,080 — almost hitting the $20,000 level. It quickly bounced upon the announcement of the 75 BPS interest rate hike. However, BTC failed to overcome resistance at the December 2020 support level (now resistance) at $22,650. 

It has since rolled over from this resistance and is now battling to remain above support at $21,000 — provided by a downside 1.272 Fib Extension level. 

Bitcoin price short-term prediction: Bearish

Bitcoin continues to remain bearish in the short term. A daily closing candle beneath $21,000 will certainly see BTC dropping beneath $20,000 in the following days.

The coin would need to break back above $31,650 —  June 2022 high — to be considered neutral again.

To be considered bullish, it would have to continue above the May highs at $40,000.

So, where are we heading next?

Even though the Federal Reserve has started to show its cards regarding further interest rate hikes, we are still not out of the woods of uncertainty. It is likely that the bearish pressure will continue until the Federal Reserve stops raising interest rates. It is still expected to raise interest rates by 75 BPS in the following two meetings in August and September, so we should expect the market to sink beneath $20,000 at some point — even if it recovers during the rest of the week.

Looking ahead, if the bears break beneath the $21,000 support, the first level of strong support is expected at $20,000. Beneath $20K, additional support lies at the November 2020 highs at $19,718 and the previous ATH price of around $19,666.

Beneath this, additional support is expected at $19,000, $19,500, $17,830 (December 2020 support), and $16,658 (downside 1.618 Fib Extension).

Further lower targets can be located at $16,000, $15,245, $14,000, and $12,870.

On the other side, the first level of strong resistance is located at $22,650. This is followed by resistance at $23,382, $24,235 (December 2020 resistance), and $25,485 (May 2022 lows).

Keep up to date with the latest Bitcoin Price Predictions here.

   
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