Bitcoin is aiming for $40K? Why Crypto Might See General Price Reversal
Bitcoin is finally seeing some relief after starting 2022 with relentless selling pressure. The first cryptocurrency by market cap is trading at $36,815 with a 9.6% gain in 24 hours.
BTC trends down the 4-hour chart. Source: BTCUSD trading summary
Related literature | Bitcoin Supply Shock: Only 12% Of BTC Supply Is Now On Exchange
According to Bloomberg Intelligence’s Senior Commodity Analyst Mike McGlone, Bitcoin is moving towards a 1:1 correlation with the US stock market in the near term. The crypto market has reacted to the potential shift in US Federal Reserve monetary policy.
The financial institution has hinted at raising interest rates to at least 0.25% in the first quarter of 2022 and phasing out asset purchases. The goal is to stop inflation as the CPI is at its 40-year high. This has translated into a sell-off that started in the fourth quarter of 2021.
In addition, investors appear to be ahead of a potential rate hike, a statement that could be confirmed at the FED’s Federal Open Market Committee (FOMC) tomorrow. If the institution suggests a harder shift, Bitcoin could retest its critical support level at $33,000.
In anticipation of these and other events, cash investors may be sitting around waiting to bid on BTC when the economic outlook looks clearer. In other words, the demand for risky assets is low and could remain so for the foreseeable future.
Analyst John Nash believes the FOMC meeting has already priced in a “too early” turnaround in Bitcoin and other cryptocurrencies. However, Nash expects to see a stronger jump towards $40,000 before BTC’s price plunges back into the $25,000 to $28,000 range.
At this point, Bitcoin needs to convert $36,000 and $38,000 from local resistance into support to advance to $40,000. Nash believes investors should follow the old adage, but with a twist: “Buy in May and go away”.
Bitcoin at the top in 2022?
On this point, he seems to agree with McGlone. The Bloomberg expert has been optimistic about Bitcoin and cryptocurrencies under the current market conditions. In fact, he expects the impending economic shift to give the digital asset sector, at least for BTC and ETH, legitimacy. He wrote:
Price return in cryptos is likely to spread in 2022, after assets in 2021 were a poster of speculative inflationary excess, but Bitcoin will emerge.
Source: Bloomberg Intelligence via Mike McGlone
Related literature | TA: Ethereum turns red, which could trigger a stable recovery
Other analysts expect something similar to BTC following the traditional market but gradually decoupling as it shows more strength in times of weakness for stocks. Recently, as noted by pseudonymous analyst MacroScope, the first market cap crypto has been briefly decoupled from stock futures. the analyst said:
No secret BTC has become a risk-on asset closely associated with stocks. But when stocks take a hit, keep an eye out for a potential disconnect. Can be gradual or sharp. A few scenarios are possible (longer tweet). If it happens, macro managers would be “shooting around the world”.