By Samuel Indyk
Investing.com – The price of Bitcoin edged lower on Monday morning after a relatively quiet weekend that saw the cryptocurrency hit a peak of $38,700 before briefly slipping below $37,000 today.
News flow for the cryptocurrency industry has been light over the weekend and there was no specific news for the slight drop observed from the weekend high.
Central Banks In Focus
Last week, the Federal Reserve paved the way for an interest rate hike at their March meeting. Over the weekend, Atlanta Fed President Raphael Bostic said a 50 basis point interest rate increase was not off the table in March but the comments have done little to dampen the mood.
This week, it’s the turn of the European Central Bank, Bank of England, and Reserve Bank of Australia.
Focus will likely be on the ECB, although they are not expected to make any policy changes at this meeting. The central bank has communicated that interest rate increases are not expected this year but the inflation narrative has changed and the ECB has a balancing act regarding its communication. How does it say it’s keeping an eye on inflation without signalling premature rate hikes?
The Bank of England, on the other hand, looks set to raise interest rates for the second consecutive month, which would be the first back-to-back rate increase since 2004.
The RBA is seen ending its bond-buying programme at Tuesday’s meeting but rate hikes are not forecast until the end of the year. The upcoming Federal Elections in May could muddy the outlook for Australia monetary policy throughout 2022.
However, all these central banks, like the Fed, are in the process of tightening monetary policy, whether that be next month or by the end of the year.
What does this mean for cryptocurrencies?
Cryptocurrencies have been moving in tandem with stocks, particularly the Nasdaq 100, and other riskier assets in recent weeks.
The expectations of tighter monetary policy, especially from the Federal Reserve, have weighed on Bitcoin and other major cryptocurrencies. However, despite what seemed a hawkish pivot on Wednesday, stocks and cryptocurrencies recovered some lost ground towards the end of the week.
Bitcoin had dropped below $33,000 on Monday last week but recovered to trade over $38,000 at the weekend.
If the ECB hints at a tightening of policy sooner than the market currently expects then that could cause weakness in stock markets and, in turn, Bitcoin and cryptocurrencies.
Technical levels
Support in Bitcoin is seen around $35,500 before the January low of $32,980 comes into play.
Below there, the psychological $30,000 threshold could be the next major support level.
To the upside, a break above the downtrend line at around $38,500 could see Bitcoin look to retest the $40,000 level.
At 10:50GMT, Bitcoin is trading at $37,250, down 2.5% in the last 24 hours.