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Bitcoin Is Stable Below $27,000, What Happens Next?

06/19/2023
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In the ever-changing world of Bitcoin (BTC), the current price remains considerably stable below the $27,000 level. As investors keenly monitor the price action, here are the latest market updates that seem to be influencing Bitcoin’s trajectory.

Significantly, Goldman Sachs forecasts a deceleration in US inflation that is anticipated to be slower than what the market currently expects, thereby introducing an additional level of uncertainty.

Moreover, the current legal battles between the SEC and major players in the crypto space like Ripple and Binance seem to be weighing heavily on the minds of market operators and participants.

Amidst all that, JPMorgan sparks a great discussion on the future of the US dollar amid China’s projected economic dominance. With all these factors currently in play, let us see how they shape the current landscape of the Bitcoin Market.

US Inflation To Ease Slower Than Market Projections – Goldman Sachs

According to a recent note published on Friday, analysts at Goldman Sachs, headed by chief interest rates strategist Praveen Korapaty, issued a cautionary statement stating that the anticipated pace of decrease in US inflation is expected to be less rapid than the existing market expectations, as reported by Bloomberg.

Goldman Sachs analysts hold the belief that investors might be underestimating the rate at which inflation will decline, as they assume that a significant deceleration in economic growth would result in a swifter reduction in inflation.

They also insist that market sentiment towards costs of energy might be more pessimistic than what is seen in the commodities futures.

In a recent Federal Open Market Committee (FOMC) meeting, the Federal Reserve decided to stop its cycle of interest rate hikes after it implemented ten straight increases.

This decision was impacted by the May report from the US Bureau of Labor Statistics (BLS) which represented a drop in inflation from 4.9% to 4%, marking the smallest 12-month increase since March 2021. But, core inflation remains quite elevated at 5.3%.

Despite the widespread anticipation of the Federal Reserve eventually reducing interest rates, Fed Chair Jerome Powell explicitly stated during a news conference on Wednesday that there would be no need for rate cuts for several years.

The statement contributed to the strengthening of the US dollar and weighed on Bitcoin.

“The cautionary note from Goldman Sachs about the slower-than-anticipated decline in US inflation adds to the factors weighing on Bitcoin’s performance.”

Uncertainty Growing As SEC Battles Ripple And Binance In Court

No considerable crypto events happened on Sunday, letting investors secure profits ahead of another busy week in this market.

Nonetheless, Bitcoin faced some downside pressure because of investor worries surrounding the SEC vs. Ripple lawsuit and the SEC’s actions against Binance, contributing to negative sentiment.

Moreover, growing expectations of interest rate hikes and hawkish comments from the Fed added to the bearish outlook.

The possibility of a 25-basis point rate hike in July increased to 74.4% from 52.8% the past week, based on the CME FedWatch Tool.

In the meantime, uncertainty surrounding US regulatory matters and continuous SEC actions continue to pose near-term obstacles for Bitcoin, despite getting early support earlier in the day.

What Happens To The US Dollar As China’s Economic Power Intensifies

China is expected to become the biggest economy globally by 2030, based on a report by the Centre for Economics and Business Research (CEBR).

JPMorgan analysts insist that even if China exceeds the US economy, the US dollar is not under threat of immediately losing its status as the world’s reserve currency according to historical evidence.

Although China is considered a potential competitor, analysts hold the belief that the United States possesses economic, technological, demographic, and geographical advantages that make the likelihood of displacement highly improbable.

The dollar is perceived to face substantial challenges from both the euro and the Chinese yuan, with experts envisioning a transition towards a multipolar reserve currency arrangement.

Due to its negative correlation with the US dollar, the recent strength of the American currency has exerted an influence on the price of Bitcoin. The growing strength of the US dollar appears to have exerted downward pressure on the Bitcoin market.

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Bitcoin Price Prediction

From a technical point of view, the BTC/USD pair reached a 50% Fibonacci retracement at $26,610 recently, accompanied by a tweezer top pattern on the daily charts. This represents a weakening bullish sentiment and suggests a possible price drop in case the resistance level holds at $26,610.

Furthermore, the 50-day EMA and a downside trend line on the daily chart work as strong barriers, reinforcing the importance of the $26,610 level.

On the other hand, Bitcoin might get support near the psychological level of $26,100, and a break below that zone might result in more selling pressure, possibly targeting the levels of $25,550 or $24,750.

Consequently, a breakout past $26,610 may fuel upside momentum, pushing the price toward the levels of between $27,100 and $27,750.

Source: https://econintersect.com/bitcoin-is-stable-below-27,000,-what-happens-next