Bitcoin showed signs of weakness on August 26 as volatility in gold prices coupled with strength in the US dollar currency index to pressure sentiment.
Data from price tickers including CoinMarketCap showed increasingly lower levels on the hourly chart for BTC/USD through Wednesday, with 24-hour losses sitting at 1.8% at press time.
Overnight on Tuesday, Bitcoin challenged levels closer to $11,000, hitting lows of $11,120 before a rebound slightly higher.
Despite remaining within its $1,000 trading corridor, Bitcoin faced pressure on several fronts as the day progressed, notably a fresh dip for gold towards $1,900 before reversing direction to $1,925.
At the same time, the USD currency index, previously at two-year lows, began a serious move upwards.
BTC price arrives at “biggest level to hold”
“…Now we’ve dropped down to the next hurdle which is essentially the biggest level to hold,” popular analyst Michaël van de Poppe summarized in his latest update on Wednesday.
“You don’t want to see the price drop below this $11,200 – $11,300 zone, as that’s the crucial level… as that’s the previous high.”
Van de Poppe had previously warned about a potential dip towards $10,000, with an opportunity to look for buy-ins as low as $9,600, just below a “gap” in CME Bitcoin futures markets.
“I hope you’re not worried about this pullback by $BTC,” fellow trader Josh Rager continued, striking a reassuring tone.
“You can expect several more 30% to 40% pullbacks on the way up to new highs for Bitcoin. This is just the reality of the market.”
Rager added that it was a classic move from Bitcoin, which was seeing lower levels reappear, and cautioned traders against reacting emotionally to sudden changes of direction after weeks of upside.
Monthly, Bitcoin was still up at press time, reaching levels of around $11,450.
Fed ruffles feathers as inflation rumors mount
Away from Bitcoin spot markets, macro forces looked to take direction from the U.S. Federal Reserve’s Thursday policy speech.
Widely circulating rumors suggested that inflation would form an essential topic of conversation, with the Fed adopting a controversial policy which would allow inflation rates to climb considerably higher.
On Wednesday, Reuters highlighted misgivings over the idea, which had the air of a last-ditch attempt to keep the economy stable as it recovered from coronavirus-induced losses.
“The situation is really perilous right now and there is little that monetary policymakers at this point have left in their arsenal,” David Wilcox, ex-head of the Fed’s research division, told the publication.
Previously, commentators argued that a laissez-faire attitude to inflation would buoy safe haven assets, with one describing the consequences as “wildly bullish” for precious metals gold and silver in particular.