By Samuel Indyk
Investing.com – Bitcoin was trading back near $43,000 on Wednesday morning as Monday’s brief foray below $40,000 proved to be short-lived. Some analysts had expected that a break below that level could open the door to further losses but the support around $40,000 has held and Bitcoin has shown signs of stabilising.
Powell comments
It appeared that comments from Fed Chair Jerome Powell supported the prices of cryptocurrencies and other risk assets on Tuesday.
Powell said the central bank will act to prevent high inflation from becoming entrenched but appeared to suggest that starting to shrink the balance sheet may not commence as soon as the most recent minutes suggested.
“At some point, perhaps later this year, will allow balance sheet to shrink,” Powell said at his re-confirmation hearing in front of the Senate Banking Committee.
Following the minutes from the Fed’s December meeting, some analysts had expected the Fed could begin to shrink the balance sheet soon after the first interest rate hike, as early as this summer, but Powell’s comments indicate that it may not occur until later in the year.
Markets are currently pricing in a 75% chance of a 25 basis point rate increase at the Fed’s March meeting.
Impending Death Cross
On a technical basis, many analysts have highlighted the impending ‘death cross’ in Bitcoin that is likely to take place by the end of the week. A ‘death cross’ occurs when a shorter-dated moving average (in this case the 50-day) crosses below a longer-dated moving average (the 200-day).
According to traditional technical analysis, a ‘death cross’ is set to signal further bearish momentum which could mean more selling in Bitcoin.
Bitcoin’s current 50-day moving average stands at $49,019 and the 200-day moving average is $48,353.
Bitcoin now trades in close proximity to the flash crash low from 4th December, which has acted as resistance in recent days. If Bitcoin manages to hold above that level then it could open the door for a move higher towards $45,000.
To the downside, the level around $40,000 will likely continue to act as support.