Bitcoin Roundup: Profit-Taking, Fed Rate Cut and Key Support Tested
Bitcoin started to slip at the end of last week as profit-taking, cautious reaction to the Fed’s rate cut, and volatility in futures markets weighed on sentiment. The cryptocurrency now trades at a crucial support zone, with traders watching for either a deeper pullback or a recovery.
Last week's Bitcoin roundup
Bitcoin's decline on Friday appears largely driven by profit-taking after a recent run-up. The crypto market had climbed ahead of the US Federal Reserve’s (Fed) decision to cut rates, and with Bitcoin hitting a one-month high on Thursday, some investors used Friday as an opportunity to lock in gains.
Even though the Fed did deliver a 25 basis point rate cut, expectations of more aggressive easing had already helped boost risk-asset demand, particularly in cryptocurrencies. As those hopes adjust to what the Fed signals in its forward guidance, some traders grew cautious, leading to mild downward pressure on Bitcoin.
Also contributing was the behaviour in derivatives and futures markets. Open interest remains elevated, and with many traders positioned for further gains, there is often a tendency for sharp moves down when sentiment shifts. Some of Friday’s price action reflects this exposure.
Bitcoin drops to key support zone
Bitcoin bearish scenario:
Bitcoin is weighing on the lower boundary of its $113,510.23-to-$111,982.45 support zone. A fall through it on a daily chart closing basis may lead to the June peak and 4 September low at $110,617.03-to--$109,385.95 to be revisited. Further down lies the early September low at $107,286.25.
Bitcoin bullish scenario:
As long as Bitcoin holds at the $111,982.45 early August low on a daily chart closing basis, a recovery towards the upper boundary of the support zone at $113,510.23 may be retested. Further up meanders the 55-day simple moving average (SMA) at $114,430.29.
Only a swift bullish reversal, rise and daily chart close above Monday's $115,459.09 intraday high would indicate the the current key support area has done its job and held.
Bitcoin daily candlestick chart
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