The price of Bitcoin (BTC) plunged to its lowest level since June 19th as fears of global risks and further interest rate hikes by the Federal Reserve persisted.
The BTC/USD exchange rate fell to a low of $18,576 today. After that, the largest cryptocurrency by market capitalization recovered a bit and is currently trading at around $18,885.
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Why is Bitcoin crashing?
The price of Bitcoin has declined sharply in recent months as investors remain concerned about the growing risks in the market.
The biggest of these risks comes from the U.S. Federal Reserve, which has taken an extremely aggressive tone in its monetary policy. It has already raised interest rates by 225 basis points and initiated quantitative tightening. At the same time, Fed officials have indicated that rate hikes will continue in the coming months.
Fed Chairman Jerome Powell reiterated that view at the Jackson Hole Symposium in Wyoming. He also warned that future decisions could be painful for the market as the bank battles extremely high inflation.
Historically, Bitcoin and other risky assets tend to do worse when the Federal Reserve raises the federal funds rate. In fact, most stock indexes like the Dow Jones and Nasdaq 100 have fallen back after a sharp rise in August. We had seen a similar trend after the stock and cryptocurrency bubble inflated in 2020, so it makes sense to expect another price slide when the Fed unwinds the new bubble.
In line with this, the bitcoin price has now plummeted due to the rising US dollar. The Fed has reduced the volume of dollars in circulation and caused interest rates to rise. Many investors are now fleeing to the safety of the USD. This has caused the dollar index to rise to its highest level in more than 20 years.
At the same time, recession risks remain in the market. Recent data from S&P Global shows that activity in the manufacturing and services sectors is declining in most countries.
Bitcoin Price Forecast
The price chart shows that the BTC price has been in a strong downtrend in recent weeks. On the chart, Bitcoin formed a double top formation at around $63,908. In price action analysis, this pattern is usually a bearish sign.
Now the cryptocurrency has fallen below the neckline of this pattern. The current price of Bitcoin is below the lines of the moving averages of the last 25 and 50 weeks. So, it might happen that the price will fall further as sellers target the next important support at $12,365. This price follows from measuring the distance between the double top and the neckline.
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