The Bitcoin price is still in a tight range as investors worry about regulations and a relatively tight monetary policy environment after the strong inflation data. BTC is trading at $37,000, bringing its total market capitalization to more than $698 billion.
Regulations and Bitcoin
Bitcoin and other cryptocurrencies are facing the twin challenge of tighter regulations and a tightening monetary environment.
This week, calls for tougher regulations in the United States increased after it emerged that JGB paid $11 million to Russian hackers. This followed another $4 million ransom paid to people who hacked the Colonial Pipeline. Worse, many hacks and ransomwares are not being reported because of their small sizes.
As a result, many politicians and commentators have made the case of adding tougher regulations on Bitcoin. This week, the loudest call came from Senator Elizabeth Warren, of Masachussets. In a statement, she asked Congress to work hard to deliver new regulations. Precisely, she said:
“Cryptocurrency has created opportunities to scam investors, assist criminals, and worsen the climate crisis. The threats posted by crypto show that Congress and federal regulators can’t continue to hide out, hoping that crypto will go away. It won’t. It’s time to confront these issues head-on.”
Elsewhere, in China, regulations are getting tougher. In the past few days, searches for terms like Binance and Huobi in Baidu returned zero results. And, it is said that the country’s Yunan provice is considering banning Bitcoin mining.
Inflation and BTC
Bitcoin price is also facing the challenge of rising inflation in the US. Data published by the US government showed that the country’s consumer prices rose to a 2008 high of 5%. Core inflation, which excludes volatile food and energy products, rose by 3.8%.
Still, these numbers are exaggerated because they compared May last year, when the US was in lockdown. Also, the prices have risen because of the ongoing logjam in the global supply chain as demand rises. This means that the numbers will likely start falling as the global economy reopens.
Inflation is an important aspect for BTC prices because of its impacts on interest rates. Ideally, the Fed’s natural tool to curtail rising inflation is higher interest rates and tightening of the quantitative easing program.
Still, like I have noted before, high interest rates or tapering are not bad for BTC prices. Indeed, what is affecting Bitcoin is the uncertainty of when this tightening will happen. If the Fed provides this clarity, we will likely see BTC prices dip briefly and then start rising.
Bitcoin price prediction
The daily chart shows that the BTC price has been in a tight range recently. Along the way, it has formed what looks like a bearish pennant pattern that is shown in blue. The downward trend is also being supported by the 200-day and 50-day moving averages (MA) and the Ichimoku cloud. It is also at the same level as the 50% Fibonacci retracement level.
Therefore, in my view, Bitcoin is still not in the buying zone. To do that, bulls will need to push it above the resistance at $40,000. At the same time, a drop below $30,000 will start bringing $20,000 to the view.