© Reuters.
By Samuel Indyk
Investing.com – The was trading close to $ 43,000 again on Wednesday morning, as Monday’s brief foray below $ 40,000 proved to be short-lived. Some analysts expected a break below this level to open the door to further losses, but support around $ 40,000 held firm and bitcoin showed signs of stabilizing.
Powell’s Comments
It appears that comments from Fed Chairman Jerome Powell supported the prices of cryptocurrencies and other risky assets on Tuesday.
Powell said the central bank will act to prevent high inflation from setting in, but appeared to suggest that the start of the balance sheet shrinkage might not start as soon as the last few minutes suggested.
“At some point, perhaps later this year, we will allow the reduction in the balance sheet,” Powell said during his reconfirmation hearing before the Senate Banking Committee.
Following the minutes of the December Fed meeting, some analysts expected the Fed to start reducing its balance sheet soon after the first interest rate hike, as early as this summer, but comments from Mr Powell indicate that this may not happen until later in the year.
Markets are currently putting the probability of a 25 basis point rate hike at 75% at the March Fed meeting.
Imminent Death Cross
From a technical standpoint, many analysts have pointed to an imminent bitcoin “death cross”, which is expected to take place by the end of the week. A “fatal cross” occurs when a short-term moving average (in this case, the 50-day average) drops below a long-term moving average (the 200-day average).
According to traditional technical analysis, a “death cross” is a sign of further bearish momentum, which could mean more bitcoin sales.
Bitcoin’s 50-day moving average currently stands at $ 49,019 and the 200-day moving average is $ 48,353.
Bitcoin is currently trading near the low point of the December 4 flash crash, which has acted as resistance in recent days. If bitcoin manages to hold above this level, it could open the door to a rise towards $ 45,000.
On the downside, the level around $ 40,000 will likely continue to provide support.
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