February 2023, The Distributed, Stanko Illiev and Md Ishtiaque Ahmed
The cryptocurrency market started to lose value this Friday after the latest inflation data coming from the US showed that the personal consumption expenditures (PCE) price index shot up 0.6% in January. This increase exceeded analysts’ expectations, who expected a 0.4% increase after the PCE gained 0.2% in December.
It is important to say that the personal consumption expenditures (PCE) price index are the Fed’s preferred inflation gauge. Due to this increase, investors started to worry that the US central bank might raise interest rates by 50 bps in March. The US Federal Reserve certainly has more work to do to reduce inflation, and the aggressive monetary policy is unsuitable for riskier assets like stocks and cryptocurrencies. Gene Goldman, chief investment officer at Cetera Investment Management, said:
“The headline and core PCE numbers were well above expectations. What worries us most is that the data since the last Fed meeting has been extremely strong. If the Fed had this data at the last meeting, they probably would’ve raised by 50 bps, and the tone from the press conference would’ve been a lot different.”
The cumulative market cap of all cryptocurrencies has lost over $40 billion in less than twenty-four hours (after PCE data was released). Bitcoin weakened again below the $23,000 level for a moment. It is still unclear if this is just a short-term correction or a beginning of a new bearish leg, but if Bitcoin’s essential support levels at $22,000 fail to hold, a further drop toward the $20,000 level could be possible.
The price of Ethereum (ETH) is also under pressure, but it is not yet clear whether bears will find enough funding to push the price again below the strong support level that stands at $1,500.
Technical Analysis of Bitcoin (BTC)
Key Findings: BTC Technical Analysis
- Bitcoin is still under the bullish trend despite failing to hold above $24,000.
- The price is rejecting the current trendline support.
- The 8 EMA is firmly moving over the 21 EMA, indicating an uptrend.
- The RSI value remains above 50, which suggests bullish momentum.
- BTC must exceed the immediate resistance at $24,000 to reclaim the position above $25,000.
Bitcoin (BTC) suffered huge sell pressure, around $25,000, as the price got rejected from the resistance and eventually dropped below $24,000. However, the price met support near the trendline support, indicating a possible extension of the recent bullish move.
According to the daily chart, BTC has already returned above the 21 EMA and heading towards the next dynamic resistance at 8 EMA. Besides, the bullish crossover plotted by these EMAs remains valid.
The Relative Strength Index (RSI) value denies moving below 50 and rebounding upwards from the level, indicating the market is likely to continue moving within a bullish momentum throughout the upcoming week.
Despite bullish trend signals from multiple technical indicators, Bitcoin is yet to retest $24,000 and break above the resistance to march toward the psychological resistance at $25,000.
Technical analysis of Ethereum (ETH)
Key Findings: ETH Technical Analysis
- Ethereum holds above $1600 despite the current bearish momentum.
- The price has dropped below the 10 MA, which signals a downtrend market.
- The level at $1500 remains a strong support zone.
- A break below the current support may force the price to retest a further downside target near $1300.
- ETH must break above the immediate resistance at $1800 to rejoin the recent bullish rally.
Ethereum has weakened from $1,664 to $1,558 since February 24, and the current price stands at $1,600. The price has moved again below the 10-day moving average, indicating that this cryptocurrency could fall even more in the upcoming days.
The strong support level stands at $1,500.00, and if the price breaks this level, we could see Ethereum at $1,300.00 or even below. Traders should also consider that the price of Ethereum is usually in correlation with Bitcoin, and if the price of Bitcoin falls below $22,000, we could probably see ETH at a lower price level than the current price.
The important resistance level for Ethereum stands at $1,800, and if the price advances above this level, the next target could be $1,900 or even $2,000.
