Where will the US dollar index hit a 20-year high for bitcoin prices?

Cryptocurrencies are still suffering negatively as risk assets sold off across the board after the Federal Reserve stepped up its hawkish comments on the inflation outlook. Bitcoin price action is back in the sub-$20,000 region, with traders and analysts expecting a retest of the June lows of this year.

While all is calm for the moment ahead of the Fed’s decision to raise interest rates in September, there is still a lot of jitters due to geopolitical uncertainty and persistent inflation, with investors wondering where BTC/USD could be headed in the coming days.

Spot price triggers $18,000 target

BTC/USD ended Aug. 28 with a sharp sell-off, resulting in its lowest weekly close since early July. Analysts are understandably less optimistic in the short-term.

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“Hopefully we’ll see a recovery this week, but the way stocks closed Friday didn’t look that great,” trader Josh Rager summed up his Twitter followers in an update over the weekend.

Still, crypto popular trading account Il Capo noted the possibility of a brief squeeze to the upside before continuing the downtrend. Noting that negative funding rates mean the derivatives market is prone to outright losses, he predicts that $23,000 may resurface first.

He tweeted, “Much more people are expecting $19,000 than $23,000. Funding says it all. Also, there is a lot of liquidity above $21,000.”

In response, trader Mark Cullen noted that traders “added more BTC short positions in the $20,100 to $20,300 area.”

Amid calls for $17,000 or lower, technical analyst Gert van Lagen gave a minimum target of $17,500 on the daily chart.

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Meanwhile, $18,400 is an area to watch, according to TMV Crypto.

Traders brace for further losses in U.S. stocks

The bombshell of a speech by Federal Reserve Chairman Jerome Powell on Friday sent shockwaves through risk assets around the world.

According to one statistic, Powell’s eight-minute speech wiped more than $2 trillion off global stock markets, including $1.25 trillion in U.S. stocks alone.

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“At some point, as the stance of monetary policy tightens further, it may become appropriate to slow the pace of rate hikes,” Powell said.

Speaking on Bloomberg Television, Paul Christopher, director of global market strategy at Wells Fargo Investment Institute, warned that U.S. stocks will fall further, with the S&P 500 heading below 4,000.

On the other hand, July’s inflation peak has heralded a macro low for stocks.

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U.S. dollar index hits 20-year high

A key factor in this week’s stock market turmoil remains a stronger dollar.

With the U.S. dollar index (DXY) hitting a fresh 20-year high this week, the negative correlation between the U.S. dollar’s performance and risky assets has come into focus.

At the time of writing on Aug. 29, these highs are continuing, with the DXY having reached its highest peak since September 2002 at 109.47.

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Raoul Pal , founder of Global Macro Investor, responded, “If the dollar keeps going up, that’s really going to be a spoiler.”

Michaël van de Poppe was equally astounded, describing this as “a pivotal moment for the entire crypto market.”

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The surge in the dollar has also brought pain to major fiat currencies, especially the euro, which quickly fell back below parity against the dollar on August 29.

The European Central Bank and the Bank of Japan have been reluctant to push for rate hikes like the Fed, causing inflation to continue climbing over the summer.

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MVRV-Z indicator

The MVRV-Z score indicator, which began in July to prepare analysts for a bottom in prices, is now falling again, to its lowest level in a month.

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MVRV-Z uses market capitalization and realized price to determine how close BTC/USD is to its “fair value.”

In July, it touched a potential BTC price floor of $15,600 while briefly exiting the buy zone before returning in the second half of August.

Data from on-chain analytics firm Glassnode suggests that the realized price is now around $21,600.

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‘Extreme fear’ makes a comeback

Perhaps unsurprisingly, Bitcoin fell below $20,000, sending its key market sentiment indicator back to its most bearish level.

As of Aug. 29, the Crypto Fear and Greed Index was back in “extreme fear” territory.

This year even saw its longest period of “extreme fear” on record, with an overall market sentiment score of just 6.

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However, in an analysis of investor sentiment, on-chain research firm Santiment noted that a large number of investors are accumulating rather than withdrawing.

The agency commented on a chart in August: “Bitcoin hovered around $20,000 over the weekend, a positive sign being the growth in the number of key whale addresses. The price of BTC correlates with addresses holding 100 to 10,000 BTC. There is a correlation between the volumes, up 103 in the last 30 days.”

Still, others believe there is still some way to go before cryptocurrency demand reaches a true macro inflection point.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/where-will-the-us-dollar-index-hit-a-20-year-high-for-bitcoin-prices/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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