Bitcoin Price Could Get Extremely Ugly – Barrons

Bitcoin (BTC/USD) price recent rebound has faded and its easy to see why. After soaring to a two-month high of $21,470, Bitcoin has pared back some of those gains to trade at $20,895. This decline is mostly because of the fundamentals and technicals of the coin as I will explain below.

Bitcoin Fundamentals

The main fundamental reason why Bitcoin is pulling back is the rising fears of a recession. A recent survey by WSJ placed the risk of a recession in the US at 61%. That is notable since it is the highest the figure has been in months. 

At the same time, Wall Street banks like Goldman Sachs, Citigroup, and Wells Fargo published weak financial results. Most of them said that their profits tumbled by more than 30% in the final quarter of 2022. Reading between the lines shows that most of them have allocated millions of dollars in credit loss provisons.

Historically, these provisions tend to rise when there is a fear of a recession. At the same time, many safe American companies have starte announcing substantial layoffs recently. Amazon is laying off 18,000 people while Microsoft, Salesforce, Meta Platforms are laying off thousands of workers. In a note, an analyst at Oanda said:

“Bitcoin prices are weakening as growth fears have Wall Street worried a soft landing might not happen. The outlook for crypto has improved dramatically over the past few weeks, but the current rebound appears to finally be facing some resistance.”

Bitcoin technicals

Another reason why Bitcoin is pulling back is because of its technicals. As you can see in the daily chart below, Bitcoin is retreating after it reached the key resistance level at $21,465. This was an important level since it was the highest level on November 5 of last year. In most cases, Bitcoin and other financial assets tend to retreat when they hit an important resistance level.

Most importantly, it is forming a cup and handle pattern, which is usually a bullish sign. Therefore, while Barrons is warning that it could get ugly, I suspect that the bullish momentum is still in place. My outlook for Bitcoin is at $25,000.