YEREVAN (CoinChapter.com) – Bitcoin clocked in at $24,700 in the Asian-Pacific session on Feb 16, riding the wave of short liquidations and boosting the BTC price 15% since Feb 14. However, persisting recession fears and a higher-than-expected inflation rate could mean more hawkish policies from the Federal Reserve and dampen Bitcoin’s hopes for a bullish continuation.
BTC Pares February Losses
As mentioned, Bitcoin bulls pushed the flagship crypto to $24,700 early on Feb 16, paring the February losses. As a result, the BTC/USD exchange rate reached a six-month high, knocking at a crucial resistance of $25,000.
Bitcoin short liquidations pushed the BTC price higher
Traders liquidated $85.8 million of short-bitcoin positions over the last 24 hours, pushing up the coin’s price, according to data from Coinglass.
That’s the highest level in which traders have covered their bearish BTC bets since Jan 24. The short squeeze could possibly continue, giving BTC extra time to climb over the $25,000 resistance.
Whitney Setiawan, the research analyst at crypto exchange Bitrue, said the 2023 rally “could signal that we will have a bull run in the near future.” However, the analyst was cautious, noting that the bearish factors persist.
We must keep in mind that the macro foundation for the markets is not as strong, and a change in Fed tone could potentially disrupt the formation of a sustainable bull run. For this reason, it would be safer to bet on a bear market rally rather than a full-fledged bull market.
Caution – Bears Ahead!
While Bitcoin’s 50% year-to-date rally was impressive, the bearish factors that could hinder the price appreciation also still stand. For one, the weekly chart threw a warning sign that could cut the bulls’ celebration short.
BTC Weekly Chart Shows a Death Cross
The weekly BTC/USD price action formed a ‘death cross’ in Jan 2023 between the 50-week exponential moving average (EMA-50) and the EMA-200 for the first time ever. In detail, the death cross occurs any time a short-term MA crosses below a long-term MA and threatens a bearish phase for as long as the crossover persists.
Moreover, unlike the daily chart, the weekly trading volumes declined in the previous month, despite the price appreciation. Additionally, the bearish incentive on the weekly chart coincides with the overall grim predictions coming Bitcoin’s way from the broader economy, including a looming recession.
Macro Factors are Alarming
The recent CPI report marked the January inflation at 6.4%, which is still far off from the ‘healthy’ 2% inflation that the Fed aims to achieve. It means that lawmakers will likely implement more interest rate hikes in the current year to tame the rapid rate of the decline in buying power.
Greg McBride, the Senior Vice President and Chief Financial Analyst at Bankrate, agreed. He told CoinChapter that “the lack of substantive progress will underscore the Fed’s message about continuing to raise interest rates.”
There has been progress in the inflation rate of prices for goods. But the trend to follow is in the prices for services, where labor shortages are most pronounced. Services, subtracting out the cost of rent, increased 0.4% in December and was up 7.4% in 2022.
the expert asserted.
One of the interest rate ‘side effects’ is an imminent decline in stock prices, as investors hesitate to put their confidence in risk-on assets. Given the high correlation between the stocks and Bitcoin in the previous year, a possible recession will be mirrored in BTC prices as well.
Notably, the interest rate hikes don’t mean an imminent decline for Bitcoin. But in the case of more hawkish policies coming from the Federal Reserve, the possible bull run could be further delayed, as mentioned by Whitney Setiawan.
Thus, traders hoping to make the right call on Bitcoin should also watch the broader market and the Fed’s upcoming policies.
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