U.S. GDP Dips Considerably. Can It Help Bitcoin’s Recovery?
BTC/USD Fails to Break $40K as the US Dollar Hits Historical Levels
As shown by the Gross Domestic Product report released Thursday, the U.S. economy contracted by 1.4%, while the forecast pointed towards a 1.1% increase. Cryptocurrencies in general and Bitcoin in special follow the equity markets (positively correlated), thus signs of a recession could affect altcoins as well as the apex cryptocurrency.
According to XBTO chief of markets Joe Haggenmiller: “…numbers suggest that we are likely closer to a recession than previously thought”. He continued by adding “It therefore stands to reason that if negative growth persists, the equity markets may suffer and bitcoin may as well because of its positive correlation.”
However, opinions are mixed, as other analysts consider that the declining GDP may have bullish implications for the crypto market. This stems from the belief that the Fed may soften its hawkish tone at the next meeting scheduled for May 4th. According to crypto trader Justin Bennett: “A more dovish Fed sparks a relief rally from stocks and [cryptocurrencies]?”. At the time of writing, market participants still expect a 50 bps rate hike at the next meeting, and the forecast will probably remain unchanged.
Meanwhile, the US Dollar is having a blast, shooting through support levels versus the Euro and shattering resistance levels against the Yen. The US Dollar Index (DXY) traded yesterday at 103.92, breaking the March 2020 high located at 102.99. Of course, a strong US Dollar makes it harder for Bitcoin to advance, considering the two are counterparts in the same pair (BTC/USD).
Chart Analysis – BTC/USD
At press time Bitcoin is trading at $39,450, in close vicinity of the key level at $40,000, which acted as both support and resistance in the past. The pair moved below a bullish trend line and is trading below the 50-day Moving Average so it’s fair to say that the bearish signs outweigh the bullish ones.
The pair lacks momentum and price action is choppy, without a clear direction, thus a move above the $40K level may very well be reversed. False breaks happen often when candles are small and volatility is low, which is the case now. This is also evidenced by the Relative Strength Index which is moving sideways, without big peaks and troughs. The MACD lines are also very close together, showing a lack of momentum.
