Advertisement
Advertisement

Bitcoin Looks Ready For Another Test Of The $40K Level

By:
Vladimir Zernov
Published: Jan 18, 2022, 13:55 UTC

Bitcoin settled below the major support level at $42,600 amid broad crypto market pullback.

Bitcoin

In this article:

Bitcoin looks weak technically and may find itself under more pressure if Treasury yields continue to move higher.

Higher Yields Push Traders Out Of Riskier Assets

The yield of 2-year Treasuries has recently managed to settle above the psychologically important 1.00% level as traders sold U.S. government bonds on inflation fears.

Markets believe that Fed will be forced to raise rates aggressively (perhaps, more than 4 times this year) and may also cut the size of its balance sheet, which will push Treasury yields higher.

In this environment, riskier assets find themselves under material pressure. S&P 500 futures are down by roughly 1% in premarket trading. The tech-heavy Nasdaq is down by more than 1.5%.

Not surprisingly, cryptocurrencies are also under pressure. The recent dynamics of Bitcoin indicate that financial markets do not view it as a hedge against inflation. Bitcoin is still considered to be a speculative asset which declines in sync with other riskier assets.

That said, it should be noted that Bitcoin is firmly holding its top position in the crypto world. Bitcoin Dominance, which shows the market capitalization of Bitcoin as a percentage of total crypto market capitalization, has recently moved back above the 40% level which indicates that Bitcoin declined less than other cryptocurrencies during the current pullback.

Bitcoin Could Soon Test The Support At $41,000

bitcoin january 18 2022

Bitcoin has recently managed to settle below the support at $42,600 and is moving towards the next support level at $41,000.

A successful test of the support at $41,000 will push Bitcoin towards the key support level at $40,000. In case Bitcoin manages to settle below this level, it will gain additional downside momentum and head towards the $39,000 level. This move may be very fast.

On the upside, Bitcoin needs to settle back above $42,600 to have a chance to gain upside momentum in the near term. The next resistance level for Bitcoin is located at the 20 EMA near the $44,000 level. A move above this level will push Bitcoin towards the resistance at $45,500.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

Did you find this article useful?

Advertisement