- Bitcoin struggles near $40,000.
- ETHUSD pulls back after bounce back.
- US Dollar strength comes to bite.
Bitcoin and Ethereum are struggling for direction with recent bounce-back stalling. The upward momentum has taken a significant hit owing to a number of factors, key among them being traders shunning riskier assets. A strengthening dollar has also piled pressure on the two flagship cryptocurrencies.
BTCUSD technical analysis
After starting the week with a big loss in months, the US dollar appears to have stabilized, all but piling pressure on BTCUSD, which had bounced from 7-month lows. After bouncing off lows of $33,170, the pair has struggled to power through the $40,000 psychological level.
Consequently, BTCUSD has experienced strong resistance near the $39,400 level from where it has started edging lower. On Wednesday, a deep pullback to lows of $37,031 has left Bitcoin susceptible to further losses.
A breach of the $37,000 level could pave the way for further losses towards lows of $35,500, which happens to be the next substantial support level. A breach of the support level could result in the pair edging lower back to seven-month lows with $30,000, the probable target for short-sellers.
On the Flipside, BTCUSD needs to find support above the $37,000 handle to have any chance of edging higher back to the $40,000 level.
BTCUSD price action drivers
Recent price action has reaffirmed the correlation between Bitcoin and stocks. The cryptocurrency has followed suit and edged lower whenever stocks edged lower as well. The sell-off does not come as a surprise, given that the investment community remains wary of a number of factors.
Top on the list is the move by the Federal Reserve to accelerate monetary policy easing. It’s important to remember that Bitcoin had one of the best runs as the FED moved to pump the market with stimulus packages and cut interest rates.
The result was an influx in money supply as the cost of borrowing reduced considerably. Consequently, most people invested in Bitcoin, among other investments, but fuelling significant price rallies. Fast forward cheap money is no longer available with the FED moving to hike interest rates, expected to affect people’s ability to borrow cheaply to invest significantly.
BTCUSD downside action has also been fuelled by the US dollar strengthening to 19-month highs in recent highs. The rally has piled pressure on bulls. A strengthened dollar often fuels the downside action on BTCUSD. China and Russia regulatory pressure have also continued to fuel the sell-off.
ETHUSD struggling for direction
Ethereum has also not been spared amid the buildup of selling pressure around BTCUSD. ETHUSD has already tanked to levels not seen in seven months to lows of $2,170. While the second biggest cryptocurrency has bounced back recently, the upside action appears limited.
A bounce back to the $3,000 handle appears to have run out of steam, with ETHUSD facing strong resistance at the $2,800 level. The pair has since pulled back to the $2,600 handle from where short sellers continue to cycle.
A close below the $2,600 level could reignite renewed sell-off that could see ETHUSD tanking back to lows of $2,370, the next key support level. A breach of the support level could result in the coin tanking to lows of $2,100. On the flip side, the pair finding support above the $2,600 mark could reignite hopes of a possible bounce back to highs of $3,000.
While Ethereum’s downside action has mostly been fuelled by dollar strength and broader market correction, concerns that the platform is losing its edge have come to bite. In the recent past, there has been concern that Ethereum is losing market share to another platform when it comes to handling smart contracts and decentralized applications.