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Bitcoin (BTC) Key Levels to Watch


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BTC, Analysis and News

  • False Break Through 40k Could Prompt Short-Term Bullish Rebound in Bitcoin

Bitcoin (BTC), Ethereum (ETH) – Collapsing Into Multi-Month Support as  Sellers Triumph

Following a soft week on Wall Street, Bitcoin as well as other cryptocurrencies have also come under pressure. A reminder that Bitcoin is a risk-on asset or in other words a liquidity haven, the pre-Covid view that Bitcoin was a safe-haven had been well and truly debunked when Bitcoin had cratered during the Q1 2020 sell-off. Thanks to the global central bank and government largess, the crypto space has been among the top performers of the “buy everything rally”. Therefore, with the Federal Reserve talking up balance sheet normalisation to come much sooner than many had expected, the potential near-term withdrawal of liquidity poses a threat to the crypto space and likely what we are seeing now, is cryptos discounting that future withdrawal of liquidity. The chart below provides a reminder as to how Bitcoin performed during QT in 2018. Admittedly, this is just a sample size of 1, not to mention it also came after a blow-off top at 20k. However, with institutional involvement much higher now than in 2018, macros matter more than ever before.

Bitcoin Performance During 2018

Bitcoin (BTC), EUR/USD, USD/CAD Key Levels to Watch

Source: Refinitiv

False Break Through 40k Could Prompt Short-Term Bullish Rebound

Taking a look at the chart, the major focus for Bitcoin is on the psychological 40k handle. While holding off for a break below over the weekend, having hit a low of 40.5k, with equities beginning to come under pressure, we can expect another test of 40k. That being said, for those who remain a Bitcoin bull, it would be preferable for a false break below 40k, much like what we have seen previously at psychological levels.

Bitcoin (BTC), EUR/USD, USD/CAD Key Levels to Watch

Source: Refinitiv

Jan 10, 2022 |  Justin McQueen, Strategist. DailyFX

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