Bitcoin and other major cryptocurrencies are extending their huge rallies seen after Federal Reserve chair Jerome Powell hinted that the pace of rate hikes could be slower as economic growth cools down.
The extended gains come after real GDP in the U.S. entered negative territory for the second straight time in Q2, contracting 0.9% vs. -1.6% in the first quarter. The back-to-back negative readings are commonly referenced as a “technical recession.”
While recessions are not a desirable outcome, bad news is good news in this case as speculators’ expectations of future interest-rate increases ease given looming macro woes. Nevertheless, Powell emphasized during his press conference Wednesday that “I do not think the U.S. is currently in a recession,” as the economy is still adding jobs.
Specifically, markets are pricing in a 74.0% chance that the Fed will lift its target rate by 50 basis points at its Sept. 20-21 meeting, according to CME’s FedWatch tool. That would be a slower move than the Fed’s most recent hike of 75 bps to bring down inflation.
As for the bullish price action in cryptos, “you could argue this show of optimism reflects the view among investors that a more aggressive plan of action from the Federal Reserve was expected, particularly given the amount of political pressure that is building on governments to tackle inflation (not that the two should be linked!),” Ben Small, an analyst at digital asset broker GlobalBlock wrote in a note.
Bitcoin open interest stays elevated
For the past week, the bitcoin open interest has been on the rise. After hitting above 300k the previous week, there was no stopping this part of the market. However, it also pointed to more peculiarities about the current bitcoin uptrend.
For one, the elevated bitcoin-denominated open interest shows that there is very high leverage in the crypto market. As with any market, having such high leverage always puts the value of the digital asset in a perilous position. It could swing either way resulting in a short squeeze or a long squeeze. Whatever the case may end up being, the results are often the same; there are significant price swings that would go in either direction.
Bitcoin price continues to rise
Bitcoin price remained well bid above the $22,000 support zone. It formed a base above the $22,500 level and started a fresh increase. The price was able to gain pace for a move above the $23,000 resistance zone.
The bulls pumped the price above the $23,500 resistance. It even spiked above the $24,000 level and traded as high as $24,198. It is now trading above the $23,000 level and the 100 hourly simple moving average. There is also a short-term contracting triangle forming with resistance near $24,000 on the hourly chart of the BTC/USD pair.
It is also trading well above the 23.6% Fib retracement level of the upward move from the $20,696 swing low to $24,198 high. Bitcoin price is facing resistance near the $24,000 level.
Source: BTCUSD on TradingView.com
The next key resistance is near the $24,200 zone. A close above the $24,200 resistance zone could set the pace for more gains. In the stated case, the price may perhaps rise towards the $24,500 level. The next major resistance sits near the $25,000 level.
If bitcoin fails to clear the $24,000 resistance zone, it could start a downside correction. An immediate support on the downside is near the $23,740 level.
The next major support now sits near the $23,370 and $23,350 levels. Any more losses might send the price towards the 50% Fib retracement level of the upward move from the $20,696 swing low to $24,198 high at $22,450. A close below the $22,450 support zone might restart downtrend.
Hourly MACD – The MACD is now losing pace in the bullish zone
Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now correcting towards 60
Major Support Levels – $23,740, followed by $23,350
Major Resistance Levels – $24,000, $24,200 and $25,000
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