Bitcoin rebounded on Friday, recovering from yesterday’s steep fall, as the US dollar weakened and US Federal Reserve committed to a prolonged near-zero interest rate strategy.
As of 1410 New York time, the benchmark cryptocurrency was trading at $11,494.91. Earlier before, it had established an intraday top near $11,550. Meanwhile, the price maintained a concrete support level near $11,370, giving daytraders enough room to secure short-term gains within the range.
Observers anticipated the period of Bitcoin bull run to extend further in hopes of moderate-to-higher inflation rates. As a scarce asset, the cryptocurrency presents itself as a gold-like hedge against the Federal Reserve’s massive quantitative easing program, the expected outcome of which is a weaker US dollar.
On Thursday, Fed chair Jerome Powell committed to pushing the inflation rate past 2 percent in the coming years. The policy aimed at allowing more scope to aid the economy in the wake of the coronavirus shock.
But for markets, that indicated the central bank’s likelihood to prolong the period of low lending rates. As a result, the US dollar plunged into the Friday session. Meanwhile, perceived safe-haven assets like gold and Bitcoin rebounded.
Choppy Bitcoin Sessions Ahead
The Fed is not going to hit the inflation target of 2 percent overnight. Meanwhile, the central bank has ignored to announced any new, short-term stimulus packages. It is the very same reason that the bounce in the Bitcoin market appears smaller-than-anticipated.
Powell & team will need to allow the inflation rate to float above 2 percent to create long-term demand for hedging in Bitcoin and gold markets. Therefore, logging a volatile bull run appears difficult for Bitcoin, at least for now.
That leaves the cryptocurrency with a lot of choppy trades ahead. Traders might want to short BTC/USD abruptly as the pair hits a local high. Similarly, retests of the previous support channels might lift the bullish mood.
It looks like a steady uptrend, which may put rest to anticipations of seeing Bitcoin at the $20,000 valuation by the end of this year.
Prepare to be patient in #Bitcoin.
Each up cycle takes longer to play out and is less extreme as absolute dollar value gets much larger.
May or may not be another 6-12 months before price breaks up.
Should not matter as end price point obscenely higher.
Hodlers rejoice. pic.twitter.com/IH7izyxXvm
— Dan Tapiero (@DTAPCAP) August 28, 2020
At the same time, what may accelerate the next upside cycle is the US Congress. The politicians still have to narrow down the numbers on their next stimulus package. Once it comes out, investors might want to put additional selling pressure on the US dollar.
That will, one way or another, drive further demand into the Bitcoin market.