- Bitcoin price has come under intense pressure in 2022.
- It has crashed by more than 60% from its highest level this year
Bitcoin price dropped to the important support level at $19,160 as concerns about the US dollar strength and higher interest rates. BTC/USD has fallen by more than 60% from its highest level this year. Similarly, the BTC/GBP and BTC/EUR prices have fallen much further.
Strong US dollar
For a long time, Bitcoin has had an inverse relationship with the US dollar. In most cases, Bitcoin tends to rally when the USD retreats and vice versa. This trend has happened this year, with Bitcoin falling by more than 60% and the closely-watched US dollar index (DXY) surging by more than 20%.
The US dollar index has risen sharply as its constituent currencies like the euro, pound, and Japanese yen have crashed to the lowest level in years. At the same time, other assets that are priced in US dollars like the Dow Jones, Nasdaq 100, and the S&P 500 have all crashed this year.
The DXY index has rallied mostly because of the actions of the Federal Reserve. In a bid to tame the runaway inflation, the bank has embarked on its most aggressive tone in decades. It has risen interest rates by 300 basis points this year and analysts believe that the bank will deliver at least 125 basis points increase this year.
Learn more about how to buy Bitcoin with cash.
In most periods, higher interest rates usually push investors away from risky assets like tech stocks and cryptocurrencies. Besides, investors can now receive a 4% yield for just buying a 2-year government bond. BTC will, therefore, react to the upcoming FOMC minutes
The next key catalyst for Bitcoin price will be the upcoming American inflation data scheduled for Wednesday. Analysts believe that the headline and core inflation metrics diverged in September. They expect that inflation dropped from 8.3% to 8.1% while core CPI rose from 6.3% to 6.5%. Higher inflation rates will push more investors away from Bitcoin and other coins.
Bitcoin price prediction
The daily chart shows that the BTC/USD price has been in a slow downward trend in the past few days. In this period, the coin has moved to the lower side of the ascending channel that is shown in black. Notably, Bitcoin is a few points above the important support level at $17,581, which was the lowest level this year.
Therefore, I believe that this price action is a calm before the storm for Bitcoin. A clear break below the lower side of the channel will signal that bears have prevailed. Such a break will see the coin crash to the next support at $17,581, which was the YTD low.
An alternative is where the coin resumes the bullish trend and retests the upper side of the channel at $20,500.
