Bitcoin has failed to strengthen above the $40K again after yesterday’s brief upside that pushed it to highs of $40,280. Today’s market action has seen BTC retreat to lows of $38,750, although the benchmark crypto currently trades just above $39,000 according to data from crypto price tracker CoinGecko.
The market is also experiencing a negative turn, with the total market capitalisation falling 1.8%. Ethereum is the second-ranked cryptocurrency in terms of market capital, with a 1.5% drop in the 24 hours.
Recession fears could help risk assets
The current struggles for Bitcoin coincide with a slowdown of stocks on Friday, as shares in tech giants Amazon.com and Apple. In early morning trading, the S&P 500 fell 1% while the Dow Jones Industrial Average opened 0.4% lower and Nasdaq Composite lost 0.7%.
The increase in volatility will likely lead to further losses, despite concerns about the Federal Reserve’s tighter monetary policies. Next week’s Fed meeting is expected to raise interest rates by 50 percentage points. This could be a factor that market analysts believe could affect economic recovery.
Marcus Sotiriou is an analyst at GlobalBlock and suggests that Bitcoin might be a bullish signal if there’s a Fed rate hike or tightening.
Sotiriou shared this note via email Friday:
“US GDP fell by 1.4% in Q1 2022, as fears of a recession increase. This is bullish for risk assets like Bitcoin and equities in my opinion, as the Federal Reserve may become less hawkish to avoid a recession.”
The 1.4% decrease in GDP over the past year in the first quarter 2022 was the largest since Q2, 2020..
Bitcoin’s immediate outlook
Investors should be aware that Bitcoin and stocks have been increasing in correlation over the past few months.
As such, BTC could be pushed lower by equity market declines arising from geopolitical turmoil or new COVID outbreaks.
On the other hand, Bitcoin could see a surge in upside momentum in stocks which could help it break through immediate resistance levels.