Bitcoin is pulling back from its latest record high on intensifying debates about whether the recent bullish rise in cryptocurrencies is just speculative froth in global markets.
Expectations of monetary policy easing by the Federal Reserve sparked a strong rally in global stocks, bonds and cryptocurrencies over the past few months, but investors are now reconsidering their outlook after recent evidence of persistent inflation in the US.
Bank of America Corp. Chief Investment Strategist Michael Hartnett said in a Bloomberg Television interview that markets are indicating the characteristics of a bubble due to a record rise in the technology sector’s so-called Magnificent Seven stocks and all-time highs in cryptocurrencies.
The comments keep the Wall Street discussion alive about how vulnerable many markets are to a likely pullback. As for Bitcoin, supporters of buying point to net inflows of about $11.6 billion into dedicated US exchange-traded funds and an imminent decline in the token's supply growth as fundamental support.
At the same time, yesterday's report showed a surge in US producer prices, adding to fears that the Fed's campaign to control inflation is far from being over.
Bitcoin was undercut by rising US dollar yields that followed the strong data on producer price inflation. Growing US retail sales also confirms the high level of consumer demand, which will have a negative impact on inflationary processes, supporting the US dollar and weakening BTCUSD.
From a technical point of view, BTCUSD is in the overbought zone, and there is a divergence between the price and the RSI.
The most likely target of the upcoming correction is the level of 50,000 which the price will attempt to reach in the coming weeks.
The overall recommendation is to sell BTCUSD. Profits should be taken at the level of 50,000. A Stop-loss could be set at the level of 80,000.
This content is for informational purposes only and is not intended to be investing advice.
