Why “Low” Capitulation Might Hint At More Pain For Bitcoin Price

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Bitcoin price has been locked in a tight range following the US Federal Reserve (Fed) announcement yesterday on monetary policy. Macro forces have taken over global markets, increasing correlation across all asset classes.

For a deep dive into how the Fed’s 75 basis point surge affected Bitcoin price, and an inside look at the crypto market’s internal dynamics, check out our Editorial Director Tony Spilotro’s analysis. Link below:

At the time of writing, Bitcoin price is trading at $18,900 with losses of 2% and 7% respectively in the last 24 hours and 7 days. The entire top ten crypto by market cap is registering losses in comparable time periods with the exception of XRP, which continues to climb upwards in the past week with a gain of 29%.

Bitcoin price BTC BTCUSDT
The price of BTC is moving sideways on the 4-hour chart. Source: BTCUSDT trading overview

Why Bitcoin Price Needs to See More Capitulation?

As NewsBTC reported yesterday, the crypto market has completed every major near-term price catalyst with the Ethereum “Merge”. Now the market is moving along with macroeconomic factors and with traditional markets.

This could provide scope for a relief rally or more downward pressure if major financial indices move in one direction or the other. According to Jurrien Timmer, Macro director of investment firm Fidelity, there has been “little capitulation” for the S&P 500.

Despite the stock index being on a downward trend since hitting a record high at 4,819 and the current level of 3,837, Timmer believes the market has been resilient and may need more capitulation before hitting a bottom. Via Twitter, the expert said the following, sharing the chart below:

It’s amazing how little capitulation there has been on the market. Yes, the sentiment surveys are all negative, but the actual flows are not. This seems consistent with the lack of volatility in the market (…).

Bitcoin Price BTC BTCUSDT Chart 2
The S&P 500 is far from the 2020 low. Source: Jurrien Timmer via Twitter

The above coincides with analyst Dylan LeClair’s look at past Bitcoin cycles. The analyst believes that BTC is bottoming out after a “final capitulation” of the mining sector. This event can lead to a crash in the network hashrate, which is yet to be seen. LeClair said:

I believe that with macroeconomic conditions as the catalyst, something similar will happen. We’re not there yet.

Will Bitcoin Retest Its 2020 Lows?

But how low can the Bitcoin price and the crypto market crash? The benchmark cryptocurrency is already trading 80% lower than its all-time high of $69,000. This has historically marked a bottom for the price of BTC and has formed a barrier against further downward pressure.

In that sense, rather than another step down, the cryptocurrency could see more sideways moves in 2022 as the Fed continues to raise interest rates and the traditional market trend downwards. This statement may be supported by potential downward pressure on the US dollar (DXY).

The currency is on an uptrend and is moving counter to Bitcoin price and risky assets but appears to be in critical resistance area. This could give the crypto market room for a relief rally. As can be seen in the chart below, the DXY index may be above it to see a spike in selling pressure.

DXY Index Bitcoin Price Chart 3
DXY Index (US Dollar) Enters Resistance. Source: Jackis (@i_am_jackis) on Twitter

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