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Everything is at stake! Many financial market assets are ready to go all in, depending on what Jerome Powell says at Jackson Hole. And bitcoin is no exception. Sensitively reacting to the dynamics of American stock indices, and recently to the dynamics of the US dollar, the cryptocurrency needs to indicate the direction of further movement. And who can do it better than the chairman of the Federal Reserve?
While Goldman Sachs believes that Powell will present the case for lowering the rate of monetary restriction, JP Morgan believes that he will not be able to surprise with overly aggressive hawkish rhetoric. Both options are positive for risky assets, including equities and crypto assets. Moreover, history shows that the USDBTC downward trend may be about to come to an end. The bear markets of 2014 and 2018 lasted an average of 12–13 months, with a maximum drawdown of 85%. Today, the token has fallen by 70% from the November high, and its peak continues for almost 300 days.
On the other hand, September is a seasonally weak period for the crypto industry leader. Bitcoin has consistently closed in the red for the past five years and has declined by an average of 10%.
Bitcoin Dynamics in September
This circumstance increases the demand for insurance against BTCUSD quotes falling below 18,000 and 15,000. Interest in options with these strikes has increased significantly, as well as the number of premiums for them. An analysis of the derivatives market also shows the maximum open interest near the psychologically important mark of 20,000. Its breakthrough may provoke a surge in hedging operations, which will take the cryptocurrency significantly lower.
The recently increased correlation with the US dollar does not promise a quiet life for bitcoin. In order to achieve its goal of returning inflation to 2%, the Fed must tighten financial conditions, and for this, Powell needs to convince the markets that the federal funds rate will rise to 4% and remain at or above this level for a long time. This creates a tailwind for the US currency and will put pressure on BTCUSD.
Dynamics of the US dollar and Bitcoin
In my opinion, without a steady growth above 25,000, it is premature to talk about breaking the downward trend for the analyzed asset. On the contrary, there are increased risks of its further decline towards 18,000. It is doubtful that Jerome Powell in Jackson Hole will spare stock indices, the fall of which will negatively affect the entire cryptocurrency sector.
Technically, on the daily chart of BTCUSD, the Three Indians reversal pattern has clearly worked out the revelations in previous materials. It allowed us to form short positions on the token from the level of 24,000. A successful assault on the support at 20,900 will allow building them up based on the exit from the cluster within the framework of the Ross Hook model. The pivot points at 19,800 and 17,800 act as targets for the downward movement. On the contrary, the growth of bitcoin above 22,200 may become the basis for profit taking on shorts and a reversal.
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