Crypto markets consolidate ahead of Jackson Hole – Cryptocurrency News

Bitcoin and most altcoins have been trading within a tight range during the past week as crypto investors and markets are eagerly awaiting Jerome Powell’s speech at the Jackson Hole symposium on Friday. The Fed is expected to provide new clarity on the pace and timing of its monetary policy pathway as well as its latest outlook on inflation over the next few months. Therefore, as Bitcoin’s correlation with US equities remains high, any hawkish or dovish surprises could have a direct impact on its price.

Slump before consolidation

Last Friday, Bitcoin fell almost 10%, triggering a broader sell-off in crypto markets. Most of this downfall was attributed to the bankrupt Celsius Network, which received approval to sell around 7,000 of its mined Bitcoin to cover the shortfall of its operations. This huge liquidation added more downside pressure to an already wobbly market as rising treasury yields and increasing recession fears caused the Crypto Fear & Greed Index to dip into the “Extreme Fear” category for the first time in five weeks.

Eyes on the Fed

Since Monday, cryptocurrencies have been rangebound, with investors remaining on hold until the Fed’s chair provides fresh clues around what’s next in the Bank’s normalization cycle. The latest relief rally in the crypto space came amid hopes that the Fed had reached peak hawkishness in early summer, but that narrative has been shuttered by renewed comments from policymakers regarding their strong commitment to tame inflation. Nevertheless, if the latest disappointing US PMI data is coupled with a soft PCE inflation print and a slowdown in consumption, the Fed could appear more cautious over the pace of tightening.

Aside from interest rates, Powell may also offer his thoughts on the ongoing quantitative tightening, which is the process of reducing the size of the Bank’s $9 trillion balance sheet. If the Fed follows the BoE’s plan and accelerates the process through active sales of bonds, it could inflict severe damage on cryptocurrencies as they have historically thrived in periods of excess liquidity.

Energy crisis kicks in

Unlike Cardano, Solana and Ethereum after ‘the merge’ is completed, Bitcoin operates with what is known as a proof-of-work consensus mechanism. On the other hand, the aforementioned altcoins have been using a so-called proof-of-stake model, which is significantly less energy intensive.

Thus, as winter approaches and there are no concrete signs that electricity and energy prices will cool off soon, while cryptos continue to trade well below their peaks, investors and miners will probably shift their focus to the sustainability of each coin. Bitcoin miners might watch their profit margins get squeezed, but don’t forget that the proof-of-work framework has a comparative advantage. Even though it consumes more energy, it allows miners to sell energy back to the grid, which is a feature that can provide huge gains in periods of excess power demand.

Levels to watch

Taking a technical look, Bitcoin has been experiencing a decline after the price failed to cross above the 25,200 region. Although the cryptocurrency managed to find its feet and recoup some losses,  the price is trading sideways in the past few sessions as positive momentum has failed to strengthen.

Should the Fed strike a hawkish tone, the price could encounter initial support at the recent low of 20,670. Diving beneath that region, the spotlight may turn to the 18,700 barrier.

On the flipside, if buyers regain control and propel the price higher, the 50-day SMA currently at 22,470 could act as the first resistance region. Conquering this barricade, further upside moves might then stall at the recent rejection point of 25,200.

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.