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(Kitco News) – The downward pressure that the crypto market has faced in recent days was magnified on Tuesday after Federal Reserve Chair Jerome Powell signaled that the central bank will indeed need to increase interest rates higher and for longer as it struggles to get a handle on stubborn inflation.
While this announcement from Powell wasn’t completely unexpected, financial markets fell under pressure following the comments, with crypto prices whipsawing to slightly lower prices while stocks plunged without a bounceback. At the close of the markets in the U.S. the S&P, Dow and Nasdaq were well into the red, down 1.53%, 1.72%, and 1.25%, respectively.
Data from TradingView shows that Bitcoin (BTC) briefly nosedived to $22,000 following Powell’s testimony but quickly sprang back above $22,400 before proceeding to slowly drift lower throughout the remainder of the day, trading back near support at $22,000 at the time of writing.
BTC/USD 4-hour chart. Source: TradingView
Prior to Powell’s comments, March bitcoin futures prices were up slightly in early trading, according to Kitco senior technical analyst Jim Wyckoff, but that all changed in the afternoon as the futures price declined to $20,020.
“Bulls have lost their overall near-term technical advantage as a fledgling price downtrend is now in place on the daily bar chart and bears have some momentum,” Wyckoff said.
A higher low or the start of a downtrend?
According to the latest newsletter from Technical Roundup, Bitcoin has continued to pull back from monthly resistance found at $23,300, and the main zone of support is found between $19,400 and $20,500.
BTC/USD 1-month chart. Source: Technical Roundup
The current debate among analysts now centers around “whether the current pullback could simply be a higher low before another higher high,” the newsletter said.
“Our view is that conservatively, the case for this being a higher low becomes viable above the highest daily resistance i.e. $23700. More aggressively, the argument can be made above the lower boundary at $22600.”
BTC/USD 1-day chart. Source: Technical Roundup
Technical Roundup’s interpretation of the current market structure is based on two factors: the choppiness experienced in this range and the fact that the more well-defined support levels are closer to $20,000. “None of the range breakouts have had follow-through in any direction, and therefore expecting a clean market structure pattern may be premature,” the analysts said.
“In the absence of clear high time frame support levels, the daily time frame and lower time frame price action have to be especially compelling for us to develop strong views,” they wrote. “This range has been anything other than that. We’re cognisant that the market is pulling back from multi-time frame resistance, so we need good levels and/or good price action to step in front of it. At the moment, in our view, we have neither.”
Altcoins downtrend deepens
A significant majority of altcoins trended down following the hawkish comments from Powell, with only a handful of tokens in the green in late afternoon trading.
Daily cryptocurrency market performance. Source: Coin360
Everscale (EVER), OrgainTrail (TRAC) and Mask Network (MASK) led the top 200 in gains for the day with increases of 8.39%, 8.04% and 5.84%, respectively.
The overall cryptocurrency market cap now stands at $1.009 trillion, and Bitcoin’s dominance rate is 42.2%.
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