It seems like the Bitcoin honeymoon is over, and it didn’t last long. Once again, it’s all about the Fed. According to the chairman, financial figure reports from January were stronger than expected, but the negative thing is that inflationary pressures are higher as well. The Federal Reserve chairman stated this before the US Senate Banking Committee on Tuesday, which coincided with Bitcoin dropping its price.
The price drop was over 1.5%, bringing Bitcoin way down to $22,000 levels. The price has seen a bit of a rebound, but nothing big to make a difference. The S&P 500 was down almost a full percent, which once again shows the strong relation between traditional and crypto markets.
Reasons to be Worried?
Since last year, it was clear that crypto investors had to be worried about the rampant inflation. Granted, the pessimistic figures shared by the fed and some experts didn’t come to life, and we’re glad they didn’t. But, nothing is off the hook yet. Inflationary pressure is running high, and the softening inflation trends from the past month or so have been all but erased.
Powell said that returning inflation to the 2% target is still a long way off. That’s likely to be a ‘bumpy road’ and the fight will be a long and challenging one. Last year, the central bank raised interest rates eight times to take demand down. However, after a slight cool off period in December, consumer spending and hiring soared in January, putting a lot of pressure on prices.
With the S&P 500 down for the month, Bitcoin followed suit. And that’s just the beginning according to some experts. For the past couple of months, Bitcoin has been on a roll, reclaiming price level after price level and shooting as high as $24,000. Everyone was optimistic until just a few days ago which sent the price back in a downward spiral.
Seasoned crypto trader Michael van de Poppe says that the night is darkest before dawn. In translation, things are about to take a wilder turn before the price goes back up. Once the inflation data comes higher at the next hearing, markets will start correcting. The Fed wants to continue its policy, and Bitcoin’s price may suffer further.
Long-Term Resistance Point
Looking at the long term technical data, there’s a resistance point at $22,600. A clearer support level is at $22,000. In the last week of February, Bitcoin was down over 4%. This shows that investors are concerned about contagion from the recent developments from Silvergate Bank. While crypto exchanges and stablecoin providers have denied exposure, the cut-off from the payment processor system has raised a few eyebrows.
All of these factors negative impact crypto prices, but there is a silver lining. While the drop was substantial, Bitcoin didn’t slide further below $20,000 levels. The storm will pass and we’ve seen this kind of situation before, so we can do nothing more than just ride it out.