Bitcoin faces resistance at $20,300 as global investors hope for a "Fed Pivot"
(Kitco News) - The surging dollar has been the talk of the financial world in recent months as the DXY climbed to its highest level in more than two decades and left a trail of destruction in its wake.
Analysts noted the resilience of the Bitcoin (BTC) price over the past month and a half as the dollar appreciation accelerated.
According to David Lifchitz, managing partner and chief investment officer at ExoAlpha, while cryptocurrencies have been performing better than bonds and stocks in response to the surging dollar, “cryptos had already been hammered before the USD surge began and they have been stuck since mid-June in a tight range (18.5k-20.5k for BTC) with anemic volumes.”
All eyes are on the Fed as investors in both TradFi and crypto await the possibility of a “Fed Pivot” that signals the central bank will at least reduce its pace of monetary tightening.
The Fed sparked a fresh round of concern and speculation when it revealed last week that it would hold an emergency meeting on Monday, Oct. 3, which was considered as "bearish," but nothing notable materialized out of the meeting, which led to a rally on Monday afternoon “just because there was no announcement of anything.’”
“This shows how nervous and "trigger happy" the markets are these days,” Lifchitz surmised. Things got even more politicized when the UN put out an official request asking central banks to stop raising interest rates, the CIO noted.
As the market enters the last quarter of 2022, asset managers are collectively hoping for a Q4 rally “as the year has been atrocious so far for most of them, but nobody wants to pull the trigger first for the risk of being creamed if there's no follow-through.”
“This is like taking a false start as it happened on 9/10 before reverting as much on 9/13,” Lifchitz highlighted.
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The “known” reasons for hesitation are numerous: the Russia/Ukraine conflict, concerns around natural gas and oil supply, inflation, weakening economic conditions, China/Taiwan concerns and Credit Suisse weakness.
“There are also ‘unknown’ risks, which tend to show up when nobody expects them, carrying non-linear effects,” Lifchitz warned. “However, every asset manager is lined up on the starting line waiting for the FED to give the Go! signal.”
“Therefore, let's see if Powell "tricks or treats" the market for Halloween!,” Lifchitz added.
Turning to Bitcoin the analyst noted that “short-term resistance now stands at $20,300,” but cautioned that “even if we get an impulse past that level, it may quickly turn back down as it happened a couple of weeks ago: the drop on 9/13 was as fast as the pop on 9/10.”
While BTC managed to briefly break through the $20,300 resistance on Tuesday and then again on Wednesday, the subsequent pullbacks below this level “could be seen as consolidation before a final assault... or just another head fake such as the mid-September one.”