BTC/USD Raised by Key Levels, Can Uptrend Hold?

Bitcoin, crypto Topics of conversation:

• Bitcoin exceeds $20,000 despite the positive NFP reading
• $22,000 remains key psychological resistance
• Will breakout of technical resistance allow BTC/USD rise higher?

Cryptocurrency has taken a beating this year as fundamentals remain the main drivers of price movement.

While the crypto industry has experienced a boom that has led retail and institutional investors to rush to own Bitcoin, Ethereum and more recently, altcoins; the economic outlook seems to be taking a different trajectory.

Looking at the developments and responses since the start of the Covid-19 pandemic, large stimulus packages amid low interest rates have made digital assets attractive for investment, alongside stocks and “riskier assets”.

When Elon Musk highly valued Bitcoin and later Dogecoin, speculation and mob psychology caused Bitcoin to fall from a low of $3,850 in March 2020 to an all-time low of $69,000 last November.

That’s a 1,692% increase despite successive lockdowns and slowing economic growth.

However, with the invasion of Ukraine adding to price pressures, growth forecasts have been dampened by persistently higher inflation, prompting central banks to raise rates more aggressively and end quantitative easing despite rising recession fears.

For bitcoin and its peers, fear and risk aversion led to huge outflows in a month as institutions and major market participants shifted their focus to interest-bearing assets.

While this doesn’t seem like such a bad thing, it’s important to remember that regulatory oversight has been an ongoing issue for some time, as the “value” of individual coins or tokens remains a controversial topic.

But even though regulators have put in place certain rules, there is still “wiggle room” for exchanges. Now, looking back to the events leading up to the 2008 financial crisis, when hedge funds and other financial institutions used mortgage-backed securities (MBS) as a way to secure a larger portion of the real estate market, the lack of regulation allowed financial institutions to leverage themselves in the hopes of making greater profits.

A quick recap of what happened in the last two months:

• The Crash of ‘Stablecoin’ Terra (Luna)
• Downsizing at Gemini, Coinbase and other major industry leaders
• Insolvency of Three Arrow Capital (one of the largest crypto hedge funds)
• Interest rates are rising at a more aggressive pace

​​​​​​While this does not bode well for cryptocurrency holders, players such as FTX, which has entered into an agreement to acquire BlockFi, could provide a platform for additional players to liquidate if risk-averse sentiment continues to persist. If more mergers and acquisitions happen (that’s my prediction), industry leaders could give way to tighter regulations and potentially more stability for an asset class notorious for its volatility and wide price swings.

On a weekly time frame, Bitcoin prices broke above the 88% Fib from March to June, finding stability above $20,000. A break above could lead to a rally at $22,000 with additional resistance at $24,000.

Bitcoin (BTC/USD) daily chart

I prepared the diagram Tammy Da Costa using TradingView

— Posted by Tammy Da Costa, DailyFX.com analyst

Connect with Tammy and follow her on Twitter: @Tams707