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Bitcoin trades flat as economic data weighs heavily on risk assets

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(Kitco News) - The crypto market saw another day of sideways trading on Monday as the weakness present at the end of last week carried through the weekend while traders continued to weigh the prospect of higher interest rates for longer and what that means for risk assets.

Stocks rallied in the early morning session as Wall Street looked to bounce back from its worst week of the year, but the early gains moderated as the day progressed and economic data showed that new orders for manufactured durable goods plunged 4.5% in January, the biggest drop since April 2020. At the close of markets in the U.S., the S&P, Dow and Nasdaq all managed to finish in the green, up 0.31%, 0.22%, and 0.63%, respectively.

Data provided by TradingView shows that Bitcoin (BTC) bulls attempted to stage a midday rally higher but were rejected at $24,000, leading to a pullback to a daily low of $23,255 before reinforcements arrived to bid it back above support at $23,400.

BTC/USD 4-hour chart. Source: TradingView

Despite the loss of momentum, “Bulls still have the overall near-term technical advantage as a price uptrend is in place on the daily chart, but just barely,” according to Kitco senior technical analyst Jim Wyckoff, who warned that “Bulls need to show fresh power soon to keep the uptrend alive and to keep their technical edge.”

Economic data weighs on crypto prices

The reasons for the loss of momentum were highlighted in Monday’s Trade Letter from analysts at Eight Global, who noted that last week’s Personal Consumption Expenditures (PCE) data came in higher than expected, while previously released data was also revised higher.

“Looking at CPI, PCE and PPI data as a whole might have shattered some overly optimistic projections of inflation going away fast and for good, and this reflected in prices,” Eight Global said. “Not to an extent where upward trend structures on higher time frames were broken, but enough to become more cautious again.”

The rising threat of a potential 50 basis point hike is also rattling investors as the latest estimates from CME Group say there is a 30% chance the Fed will need to raise more than the anticipated 25 bps hike.

“A big question is also whether the Fed will bump up its forecast of where it estimates the benchmark interest rate to peak at its next policy meeting in March,” Eight Global said. “The comments and tones by the Fed officials this week may give us some early indication of what we should expect.”

Looking at the Bitcoin chart, Eight Global identified $23,600 as the price level BTC needs to flip back to support if traders hope to make a run at the $25,000 resistance level.

BTC/USD 1-day chart. Source: Eight Global

“A rejection here would likely lead to a retest of the tentative channel bottom, now in sync with the 50SMA, and even the 0.382 fib level of around $21,700 which we already saw tested for support earlier this month,” the analysts said. “Another retest of the latter would not scream strength, but as long as the support hold in that area, there is no structural reason to YOLO short.”

Eight Global identified the 50-day simple moving average, located at $22,400, the 0.382 fib level found at $21,700, and a reclaim of $23,600 as price levels to potentially look to open a long moving forward.

“The RSI has come down all the way to around 50, giving it plenty of room where we can see another push upward,” they said. “The thesis that if $25,000 gets flipped to support in a sustained manner, $28,000 is the next likely HTF [high time frame] target, remains.”

Altcoins follow Bitcon’s lead

While the broader altcoin market traded in the red on Monday, a handful of tokens managed to buck the trend and post double-digit gains.

Daily cryptocurrency market performance. Source: Coin360

NEM (XEM) was the biggest gainer on the day, with its price increasing 43.08% to trade at $0.0592, followed by a 13.22% increase for Gitcoin (GIT), a 12.9% gain for RSK Infrastructure Framework (RSK) and an 11.22% increase for Stacks (STX).

The overall cryptocurrency market cap now stands at $1.065 trillion, and Bitcoin’s dominance rate is 42.2%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.