Key takeaways:
- Bitcoin plunged to its 10-week low of $18,500 on Tuesday
- The reason for the drop lies in broader negative macroeconomic trends, including new interest rate hikes and strengthening USD
- A prominent crypto analyst believes BTC could bounce to $23,000 before hitting new lows
Bitcoin hit its lowest price point in over two months on Tuesday, with the world’s largest cryptocurrency breaking a multi-week long period of flat trading with a break towards the bottom. BTC/USD lost nearly 5% of its value in the last 24 hours and dropped to $18,578.
What is driving negative BTC market activity?
The reason for the sudden drop in the price of BTC, and the majority of other digital assets, likely lies primarily in investors’ anxiety over an upcoming speech from the Federal Reserve (Fed) chairman Jerome Powell, and a press conference by the European Central Bank (ECB). Both events are slated to take place on Thursday.
Following two consecutive 75 basis points rate hikes in June and July in the US, it is widely believed ECB could be following its American counterparts in employing restrictive monetary measures in a fight against inflation. The eurozone is currently experiencing record inflation of 9.7%, with the rate expected to increase to double digits in the coming months.
Both the US and the EU officials are expected to keep raising interest rates until inflation subsidies. Last month, the Fed released a report saying the restrictive monetary policy would probably continue for the better half of 2023.
On top of growing interest rates, the strength of the US Dollar reached a twenty-year high earlier this week. DXY, an index tracking the performance of the USD against a basket of major fiat currencies, hit 110 points on Tuesday.
Historically speaking, both the strong dollar and interest rate hikes have demonstrated to be clear bearish signs for Bitcoin.
Despite the bearish medium-term outlook, a prominent BTC analyst with over 500k Twitter followers, “il Capo of Crypto”, believes Bitcoin could bounce to $22,500–$23,000. “Price is right now sitting above major daily support (range low, 18500-19000). It’s where the last bear market rally started, indicating there’s strong demand here,” wrote the analyst.
However, despite the potential surge, il Capo thinks Bitcoin will reach new lows going forward.
According to our automatic BTC price predictions, the world’s largest crypto could form a rally towards the end of the year, and post new 12-month+ highs in early 2023.
