Why Bitcoin May Have a Hard Time Breaking the $32K Barrier

Bitcoin maintains its crabby price action as it continues to move sideways in lower and higher time frames. General market sentiment briefly turned bullish during today’s trading session, but BTC has bounced back to its critical support area.

Related literature | Bitcoin observes longest period of extreme fear since April 2020

At the time of writing, the price of BTC is trading at $29,700 with a 7% loss in the last 24 hours. Before retesting these lows, Bitcoin was rejected above $32,000 and appeared to be moving towards the mid-range of its current levels.

BTC is moving sideways on the 4-hour chart. Source: BTCUSD trading summary

The first cryptocurrency by market cap could react to the downward price action on traditional finance. As NewsBTC reports, Bitcoin shows a high correlation with the S&P 500 and especially higher with the Nasdaq 100 Index.

The latter was rejected at a critical level and has been on a downward trend since early 2022. This reaction was triggered by the US Federal Reserve (FED) and the start of their Quantitative Tightening (QT) program.

Unlike quantitative easing (QE), when the FED buys assets and increases its balance sheet, QT will see the financial institution sell $1.1 million worth of assets in global markets every minute, according to a report. analysis by CoinBeast Media.

As a result, global markets, including the crypto industry, could experience more downward pressure. QT may not have a direct impact on the industry, but it will play a key role in investors’ global liquidity and risk tolerance, and will contribute to the conditions that could prevent Bitcoin from regaining new highs.

The FED has more than $8.5 trillion in assets on its balance sheet. As CoinBeast explained, the last time the FED started its QT, the financial institution sold less than $1 trillion of its assets.

This resulted in a three-week crash in the stock market, which recorded a 22% loss over the period. The report added:

This created a dollar deficit and banking crisis that began in the overnight repo market in the fourth quarter of 2019. This forced Jerome Powell to famously end QT in September 2019 and spawned the infamous “Powell pivot.”

Will history repeat itself and affect Bitcoin?

At the time, macro conditions forced the FED to change its course of action. The “Powell Pivot” was followed by a massive bull run in Bitcoin and stocks.

Today, macro conditions are different, but they could again force the financial institution to rethink its strategy. In the meantime, more downward or at least more crabby price action seems likely.

Related literature | Bitcoin remains above $31,000 for now, bull rally or fall?

About the above says economist Jan Wüstenfeld said

Given the macro situation and the onset of quantitative tightening, I am not surprised by the #bitcoin price movement today. You can consider all kinds of TA, fundamentals, etc., but ignore the above factors in this environment, and you are likely to draw wrong conclusions.

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