Bitcoin drops to six-week low amid risk sentiment

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Bitcoin (BTC) is once again on the losing end as the ever-increasing list of macro uncertainty weighs on risky traditional assets.

At the time of publication, the number one cryptocurrency was trading near $38,450, its lowest since March 15, and down nearly 3.5% in 24 hours, according to CoinDesk data.

Global stock markets are a sea of ​​red, with European stocks hovering at one-month lows and S&P 500-related futures down 0.7%. Commodities also faced huge losses, ending their recent resilience. Gold, the traditional safe haven and inflation hedge, was down nearly 1% at $1,917 an ounce.

The US dollar is the only dollar to rise, proving its dominance as a safe haven asset. The dollar index, which measures the value of the US currency against major currencies, crossed 101 for the first time since March 2020. The Chinese yuan fell to 6.553 against the dollar, hitting its lowest level since November, in a sign that markets are worried about a slowdown in the second globally. The largest economy.

The renewed coronavirus outbreak in Beijing has raised fears of a severe shutdown, which is likely to exacerbate global supply chain problems, bolstering already high inflation worldwide. Chinese authorities have relied heavily on lockdowns to control the virus, as recent Shanghai experience indicates.

China’s coronavirus woes could not come at a worse time, as fears of rapid interest rate hikes by the Federal Reserve have already dampened the animal spirit in asset markets.

“It’s the same for the markets, but with a clear bearish bias for trading and cryptocurrencies,” Ilan Solot, partner at multi-strategy fund Tagus Capital, said in a Telegram chat. “I don’t remember that level of downside between contacts and Twitter, until back to cycle lows in January. The paradox in me wonders if this isn’t the time to push against the narrative.”

In fact, the sentiment looks quite bearish, as crypto Twitter is concerned about an imminent collapse of the flag on the technical chart of bitcoin, a bearish pattern that The doors are supposed to open $20,000.

While intense fear is often seen at market bottoms, it may be too early to catch the falling knife as long as the overall uncertainty persists.

“We will likely see BTC drift as low as $33,000 if overall sentiment weakens,” said Matthew Depp, COO and co-founder of Stack Funds. “We have seen steady selling in line with the downtrend of the Nasdaq during Friday’s trading. We expect this to continue in the near term and to trade tightly with stocks.”

On Friday, Bitcoin plunged below $40K as the tech-heavy Nasdaq fell more than 2% on fears of a Federal Reserve interest rate hike.

“I continue to see general downside pressure with choppy short payouts producing very little and getting battered by long liquidations,” said Laurent Kechas, managing director and head of Europe at crypto-exchange-traded fund Hashdex. $1 million in ether today). I’m still technically bearish on BTC in the short term.”

The daily chart of Bitcoin shows that the cryptocurrency’s drop below $40,000 has exposed a trend line connecting the lows of January 24th and February 24th. As of this writing, trendline support is standing at $37,420.

While the near-term outlook looks bleak, the worst could be behind us in terms of inflation fear and market pricing for a Fed rate hike, according to Tagus Funds Solot. Last week, Federal Reserve Chairman Jerome Powell outlined his more hawkish approach to controlling inflation, putting in place at least half a percentage point or more (50 basis points) interest rate increases while describing the labor market as overactive.

“We are not far from peak inflation hysteria, especially after the additional front loading of last week’s Fed tightening,” Solott said. “There should be a lot of demand destruction in store for the cycle with commodity and mortgage prices soaring, and passing the 5% rise in DXY this year should relieve some of the pressure.”

The jury is out on where Bitcoin will fall back once the hysteria subsides.

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