Bitcoin is hovering near $67,000 (March 2, 2024) as of this writing, gaining over 4% during the day – still a massive achievement of a $1.2 trillion market that has already surged over 55% since the beginning of the year.
As BTC is getting closer to updating its all-time high (ATH), more analysts are warning of a potential correction. Last week, we reported on some of these bearish views, but there are even more reasons to expect a downtrend to appease bulls for a while.
Before delving into the bearish factors, keep in mind that Bitcoin is a ‘rebellious’ asset that can defy fundamental and technical analysis logic at any time. So while you’re reading this, you know that quite the opposite may happen.
So What Are the Cautious Voices Saying?
Earlier on Monday, X user Venturefounder, who contributes to blockchain analytics platform CryptoQuant, explained that the BTC price is about to form a cup and handle pattern when it hits the old ATH.
For those unfamiliar, this is a bearish pattern that anticipates a massive correction. As it stands, “the cup” is almost there, and the potential correction would form “the handle.” This could send prices to as low as $40,000.
The analyst said:
Would you be ready for this? BTC rally to old ATH to take out all the bears, then after halving has a correction towards $50k or $40k Bitcoin to take out all the bulls.
All Eyes on Fed’s March Meeting
Besides chart patterns, bears are looking for clues from macroeconomic fundamentals as well.
Later this month, the US Fed’s Federal Open Market Committee (FOMC) will hold its second meeting this year. Postponing a rate cut would be a troubling sign for crypto bulls.
To give you an overview of what’s happening on the macroeconomic side: last year, the Fed pushed interest rates higher to 5.5%. This is the highest level in over 20 years, as the central bank has been fighting crazy inflation that previously surged to the highest in four decades.
Since this measure is a double-edged sword capable of causing a recession, the Fed is ready to reverse its previous actions and cut the rate this year as inflation is normalizing. The loosening of the monetary policy helps alternative investments, including crypto.
However, while the Fed hinted it could start reducing the rate, it may actually delay such a move, which may put pressure on Bitcoin prices.
Fed chief Jerome Powell is scheduled to testify before a US House committee and Senate panel later this week. Bloomberg analysts stated:
Powell is expected to maintain a hawkish stance in his semiannual testimony to Congress, signaling to markets that the Fed is in no hurry to cut rates. If that leads to tighter financial conditions, it will keep the pressure on the economy and raise the chance of additional lagged impacts from monetary policy.
Again, with Bitcoin sentiment dominated by greed, logic has no place in its price action – it remains to be seen how far it can go.
By the way, at the end of this writing, BTC is already up over 6.4% on the day.