The price of Bitcoin (BTC) is currently holding above $26,000, showing signs of weakness after the recent decision by the United States Federal Reserve to hold interest rates steady. On September 21st, Fed officials decided not to increase interest rates, but projections released after the meeting indicated that most officials favored a rate hike in 2023. Since then, BTC price has dropped by 4.25%.
Historically, higher interest rates have had a bearish effect on non-yielding assets like Bitcoin, as investors tend to favor safer assets such as the U.S. dollar. This has led to a decrease in the correlation between Bitcoin and the U.S. Dollar Index (DXY), with the 20-day average correlation coefficient dropping to -0.73, the lowest since September 2022. This suggests an increasingly inverse relationship between Bitcoin and the U.S. dollar.
On the other hand, some bulls are hopeful that the U.S. Securities and Exchange Commission (SEC) will approve a spot Bitcoin exchange-traded fund (ETF) in October. They argue that the approval of the first gold ETF in 2003 led to a significant increase in gold prices in the following years. These opposing factors have created a period of low volatility for Bitcoin, with the historical volatility index dropping to 13.39 this month, compared to its peak of 190 in February 2018.
Despite the recent Fed decision and volatility in the market, long-term Bitcoin holders remain optimistic. The net unrealized profit/loss (NUPL) reading for these holders indicates that they have remained profitable throughout 2023, with most holding onto their BTC and expecting higher prices in the future. In contrast, the NUPL of short-term holders has declined sharply, suggesting that speculators have been securing their profits and accumulating BTC at higher prices.
Various Bitcoin chart analysts predict an extended bull run for BTC in late 2023 and throughout 2024. They point to factors such as the upcoming Bitcoin halving by mid-2024, which has historically served as a bullish catalyst for the market. These analysts anticipate BTC prices to surpass $100,000 in the coming years.
However, in the shorter term, there are warning signs for Bitcoin’s price. Technical analysis suggests the emergence of a potential head-and-shoulders (H&S) pattern, which indicates a bearish trend. An H&S pattern forms when the price forms three peaks in a row atop a common support line. The breakdown below the neckline of this pattern suggests a potential bearish target of $25,400 for BTC in October.
It is important to note that this article does not provide investment advice or recommendations. Investors should conduct their own research and consider the risks involved before making any investment or trading decisions.