Bitcoin Falls Below $50,000 Following Bank of Japan’s Interest Rate Hike
The cryptocurrency market experienced a significant jolt when Bitcoin (BTC) crashed below $50,000 after the Bank of Japan announced an increase in its interest rate from 0% to 0.25%. This policy shift led to substantial repercussions across financial markets, particularly affecting US stock market traders who had leveraged the Japanese Yen at lower interest rates to purchase US assets. As a result, this paradigm shift impacted various risk assets, causing further corrections in Bitcoin prices.
Bitcoin Price Repeats “Lower High” Trend from Q2
Bitcoin has been experiencing a recurring “lower high” trend, which patterned itself notably on July 29 when BTC briefly touched $70,000. This third lower high (LH3) pattern has historically signaled strong bearish reversals throughout 2024. Currently, Bitcoin is down by 25% since LH3. Earlier, similar lower highs observed in April and June 2024 led to corrections of 23% and 26%, respectively.
Source: Trading View
Where is Bitcoin’s Next Key Support Level?
The sudden crash in Bitcoin prices took many by surprise. The BTC/USD pair failed to maintain its previous support levels at $60,000 and $57,000, which ultimately saw it plummet below $50,000. Axel Adler Jr, a contributing analyst for CryptoQuant, pointed out that Bitcoin has now registered a fifth instance where “the price has fallen below the moderate risk lower boundary of 9% from the average purchase price of active investors.”
"The support level for this cohort is $48K." – Axel Adler Jr, CryptoQuant Analyst
Charles Edwards, founder of the Capriole Fund, also offered insights, suggesting that Bitcoin should ideally start retracing from its present range around $52,000. However, should BTC fail to sustain above $50,000, its subsequent key support is likely around $44,000. Historically, the low $40K range served as a consolidation zone from December 2023 to February 2024.
6.39 Million Addresses Defending BTC at $42K
While many analysts anticipate that Bitcoin could bounce back at $48,000 or $44,000, data from Intotheblock indicates that significant holders are positioned even lower.
Source: Intotheblock
Approximately 6.39 million addresses currently hold 2.38 million BTC at an average price of $42,446. If Bitcoin retests this level, it would signify an additional 18% correction from its current valuation, potentially triggering further panic and undermining buyer confidence.
Related: Bitcoin ‘late longs’ washed out as BTC price falls to $65k
From a technical viewpoint, a bidding range between $44,000 and $48,000 appears plausible. This is supported by the formation of a weekly order block in this range, coinciding with other indicators. Consequently, BTC’s price has a reasonable chance of retesting the weekly 100-exponential moving average (100-EMA) in this range, with the 0.5 Fibonacci line also situated around $44,672.
Source: Trading View
FAQs
Q: Why did Bitcoin’s price crash below $50,000?
A: The crash occurred following the Bank of Japan’s decision to raise its interest rate from 0% to 0.25%. This change adversely affected traders using Japanese Yen for lower interest rate borrowing to purchase US assets, leading to a broader impact on risk assets like Bitcoin.
Q: What is the “lower high” trend observed in Bitcoin prices?
A: The “lower high” trend refers to a pattern where each subsequent peak in Bitcoin’s price is lower than the previous one. This has occurred thrice in 2024, signaling strong bearish reversals.
Q: Where is Bitcoin’s next significant support level?
A: Analysts suggest that Bitcoin’s next key support levels are at $48,000 and $44,000 if it fails to hold above $50,000. Historically, the low $40K range has been a crucial consolidation zone.
Q: How many Bitcoin addresses are defending the $42,000 level?
A: Data from Intotheblock indicates that around 6.39 million addresses hold 2.38 million BTC at an average price of $42,446, suggesting a robust support level at this price range.
In conclusion, Bitcoin’s price crash below $50,000 highlights the interconnectedness of global financial policies and cryptocurrency volatility. While technical indicators offer some levels of support, market dynamics and broader economic factors will continue to play a critical role in Bitcoin’s future price movements.