- Few obvious catalysts for Bitcoin to move out of its range-bound trading in either direction
- Macro environment not favorable for short term uptick in Bitcoin for now
Bitcoin may have had a great weekend so far and cleared US$42,000, but it’s far from out of the woods just yet, trading in a channel between US$38,000 to US$46,000 and barring any significant shifts one way or the other to bust out.
Even at current prices, there are a fair number of investors who remain out of the money, who are not ideologically invested in the promise of Bitcoin and who are probably looking for any major rally to cut their losses.
The benchmark cryptocurrency’s trading range narrowed towards the end of last week, as the war in Ukraine raged on and the U.S. Federal Reserve lifted borrowing costs, albeit well within expectations.
Some analysts believe that a sharp rally in tech stocks, which Bitcoin has demonstrated a strong correlation to, will be needed to hurl prices over technical levels of resistance for now.
Otherwise, a strong macro risk-on catalyst would be needed, for instance the Fed adopting a more dovish policy stance, which is highly unlikely for now.
Another possibility of course is that hedge funds and other specialist traders who are taking a breather from the carnage of the commodities market, divert their attention to the cryptocurrency markets, provided they have the mandate to do so.
Otherwise, Bitcoin prices are likely to stay range-bound for now, with long-term holders buying dips and short-term investors bugging out at the first hint of a rally.
Even Bitcoin bulls like Michael Novogratz don’t think that there are major drivers to sustain a rally for Bitcoin as the Fed tightens monetary policy.
Speaking on Bloomberg TV last Tuesday, Novogratz noted that Bitcoin was likely to stay in a range of US$30,000 to US$50,000 as interest rates in the U.S. were set to rise, one explanation of Bitcoin being stuck around US$40,000 to US$42,000 at the moment, smack in the middle of that trading band.
