In 2023, persistent inflation and a robust labor market set the circumstances for more Fed rate rises. As a consequence of this, the value of one bitcoin can go down concerning the value of one US dollar.
Bitcoin BTC falls $22,396, and investors already reeling from cryptocurrency business bankruptcies and banking issues may face another issue about USD recovery.
Recovery of the US Dollar
The U.S. DXY gauges the greenback’s performance against a selection of the world’s most important foreign currencies. It has gone up by 4% after hitting an all-time low of 100.82 on February 3, when it reached the lowest point ever.
Motivated by market participants’ anticipation that the Federal Reserve will maintain its path of gradual rate hikes to combat rising inflation.
Inflation continues to be a problem
A sense of caution is still prevalent despite recent data from the United States showing that depression is still not looming.
According to a study that was released this week, the number of people filing for unemployment fell by 2,000 to 190,000.
The 25th of February marked the conclusion of this, as well as greater levels of consumer expenditure in the month of January.
Bloomberg reported that 90% of U.S. firms were complaining about rising input prices, even while supply-chain issues were improving.
Notwithstanding the Federal Reserve’s efforts to raise interest rates, the survey shows that inflationary pressure is still present. The latest numbers, says Fed Governor, don’t show consumer spending dropping by significantly.
The labor market continues to be obscenely hot, and that expansion is not going down as fast as he expected it would.
The policy goal range will need to be increased even more this year if the data reports keep coming in hot. Bank of America forecasts that the Federal Reserve will raise interest rates from their current level of 4.5-4.75% to roughly 6%.
As a result, “riskier” assets like Bitcoin should see downward pressure, which should in turn revive investors’ appetite for the dollar.
Inverse head-and-shoulders pattern shown on DXY chart
The U.S. Dollar Index may rise more than 4.5% in the next months due to a historic bullish reversal pattern. This forecast is derived from a thorough examination of the relevant data.
The appearance of this pattern is said to be a head and shoulders configuration in an inverted shape. It takes place when the price makes three consecutive furrows below a common resistance line.
In comparison to the other two dips, the central one, which represents the skull, is the largest left and right shoulders.
If the price breaks above the neckline and rises to the maximum height between the pattern’s lowest level and the neckline.
It is regarded to have resolved the head-and-shoulders pattern that had been forming with it reversed. The DXY has a better chance of rebounding to 109.75 in 2023 if it breaks above its neckline around 105.25.
Will the price of Bitcoin revisit $20,000?
When Bitcoin bulls fail to conquer the $25,000 mechanical barrier level and continue the price increase, the dollar may strengthen.
Bitcoin has lost almost 13% of its value since then, with economic gust wind being a major contributor to this loss.
For the previous few days, concerns about Silvergate and its potential effects on the industry have kept the price constant.
John Toro said, if there were to be liquidity issues, it may affect the market and make certain customers’ funds less accessible.
Bitcoin’s 50-day EMA (red) around $22,500 and 200-day EMA (blue) near $21,770 have preserved their short-term positive bias. Both of these EMAs may be found within a short walking distance of one another.
Traders should watch for a break beneath the EMAs, which might occur with rising interest rates and unfavorable news. It may result in the Bitcoin price retesting the crucial $20,000 trading range in the upcoming days.