Bitcoin price bounded back above the critical zone of $21,000 after dropping below it earlier in Monday’s session. After hitting an intraday low of $20,944.79, BTC/USD was at $21,224.67 as at the time of writing.
The crypto fear and greed index, which gauges the key emotion in the market, points to a risk-off mood. Indeed,with a reading of 29, the fear levels are higher compared to the previous week’s reading of 45.
Amid the observed risk aversion, Bitcoin price hovered around the critical level of $21,000 for the fourth session in a row. Altcoins are also on a similar trajectory with the ETH/USD bulls striving hard to defend the support at $1,500.
Bets on Fed’s aggressive policy tightening
Notably, bets on further aggressive interest rate hikes by the Federal Reserve are largely behind the selloff. In mid-August, BTC/USD hit a two-month high amid rising expectations that the US central bank would increase its rates at a slower pace in coming months. This forecast was founded on heightened recession worries and assumption that inflation has peaked. From this perspective, a rate hike of 50 basis points appeared most probable during the Fed’s September meeting.
Interestingly, investors appear to be unwinding bets of a 50 basis points rate increase for a third super-sized hike of 75 basis points. Fed officials have maintained that their main priority is to ease the high inflation. Seeing that cryptocurrencies are a speculative class of assets, an environment of rising interest rates tends to weigh on Bitcoin price and altcoins.
Bitcoin price prediction
As shown on its daily chart, Bitcon price is trading below the 25 and 50-day exponential moving averages. Based on these technical indicators, as well as the fundamentals, I expect the crypto to remain under pressure in the short term.
In particular, it may continue to hover around 21,000 as it finds resistance at 22,703.50; which is along the 25-day EMA. Indeed, a move above that level will invalidate this bearish thesis. On the lower side, a move below the current support zone of 21,000 will likely have the crypto find support at 19,950.73.