Bullish Momentum Driving Bitcoin, The 2023 high of $23,048 appeared to have fallen back on Jan. 25 as prices fell to an intraday low of $22,300. The pause in the bullish momentum appears to be tied to lower earnings expectations from big tech companies and the Federal Open Market Committee (FOMC). The Bitcoin price crunch comes after a broader market drop, with analysts concerned that the cryptocurrency market could be in considerable jeopardy from the FOMC decision.
Stocks and bitcoin prices tumbled after recent corporate earnings reports showed top companies such as Microsoft (MSFT) slashed revenue forecasts as interest rates rose. As Cointelegraph reported, bitcoin prices remain closely correlated with stocks, which investors have previously expressed strong concerns about an impending recession in the U.S. economy.
While some analysts believe that Bitcoin’s current price represents an intergenerational buying opportunity at current levels, others see BTC’s strong correlation with the U.S. dollar index (DXY) and equities as reflected in price weakness at $22,500. Bitcoin prices are reacting to the widely expected adverse earnings impact on big tech companies like Microsoft, Alphabet, Salesforce and Tesla. On January 25, Microsoft shares fell 4%, while other companies fell as much as 3%. In addition to the ongoing layoffs at big tech companies, inflation appears to be holding back corporate earnings significantly, which could affect the Federal Reserve's FOMC decision.
Tech companies aren't the only ones struggling with tight profit margins. While bitcoin miners have recently shown signs of recovery, headwinds in earnings season could put pressure on thin BTC margins. The Jan. 12 Consumer Price Index (CPI) report showed that inflation fell 0.1%, but Fed Chair Jerome Powell still wants headline inflation to hit 2%. Inflation has been the deciding factor in raising interest rates. In order to fight inflation, Chairman Powell may not be able to switch to an aggressive strategy of raising interest rates.
The Consumer Price Index report, the most closely watched barometer of inflationary pressures in the U.S, is leading speculation that the Feb. 1 FOMC meeting could raise interest rates by 0.5%. Against the backdrop of persistently high inflation, some analysts believe that Bitcoin is heading for a cold winter, and prices may continue to fluctuate, leading to next week's Federal Open Market Committee meeting.
On Jan. 23 and Jan. 24, long positions in the bitcoin futures market were liquidated at $230 million. This puts further pressure on BTC prices. Bitcoin Price Negatively Impacted When BTC Longs Liquidate Without Volume Buying Pressure. As market makers and crypto-oriented firms struggle to stay afloat during the bear market, the fallout has been seen first hand in the fallout. According to Arcane Research, while transaction volumes have picked up from 2023 onwards, levels have yet to reach the annual highs seen in 2022.
Following the recent cryptocurrency rally, many coins have returned to their pre-FTX trading levels. However, the fallout from the FTX and Alameda debacles still lingers, as evidenced by recent losses at Genesis Trading, a subsidiary of Digital Currency Group (DCG).
Popular market economist Peter Schiff predicts that Bitcoin prices will soon break below previous lows. Schiff believes that the cryptocurrency market, including bitcoin, is headed for a long-term decline.
