Key Talking Points:
- Bitcoin undoes last week’s attempted rebound but finds support at a key Fibonacci level
- El Salvador moves to accept Bitcoin as legal tender
Bitcoin has been unable to hold an attempted rebound as the crypto is now resting just above a key Fibonacci support area, after undoing last week’s rebound and falling another 18% since Friday. Since January 28th, BTC/USD has fallen below 32,150 on two occasions, both of them in May, with sellers being halted so far at the psychological 30,000 mark.
US Secretary Yellen’s support to Biden’s massive sending package could spark some renewed interest in alternative investments once there is a higher interest rate environment. This is likely to lead to a bullish outlook in the longer term, but the short-term outlook continues to be skewed to the downside.
I expect crypto traders to keep an eye out for Thursday’s inflation data to gauge the possible direction of monetary policy in the coming months, so we may see BTC/USD range trading in the next few sessions. I would keep an eye out for a fall below the 38.2% Fibonacci at 32,150 as a sign of Bitcoin coming under intense pressure, which may prompt a further pullback towards the 30,000 mark, at which point buyers seem to remain in control.
BTC/USD Daily chart
The stochastic oscillator on the daily chart is showing strong oversold conditions so we may see a bounce higher over the coming week, but Bitcoin would have to jump above 40,000 for there to be a good attempt at recovering bullish momentum, and so far buyers have failed to breach this level in the last ten days. We can also see the 200-day SMA flattening just below the 42,000 line, which could be a sign that the cryptocurrency is not yet ready to breach higher.
Meanwhile, another country has moved to accept Bitcoin as a digital currency. El Salvador will accept bitcoin as legal tender in the coming days when the president presentsa law to the Legislative Assembly. The move was taken because according to its president 70% of the population in the country does not have a bank account, and he expects that bitcoin will offer a chance at financial inclusion.
To do this, El Salvador has teamed up with the Strike digital wallet company to create a new financial infrastructure. The fact is that if the Legislative Assembly approves the proposal – which is likely to happen given the President’s majority-, the cryptocurrency would be considered a foreign currency and could be used in common transactions.
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.