US Federal Reserve Chairman Jerome Powell said on February 7 that “the process of deflation, the process of deflation,” has begun but is still in its early stages.
He warned that strong data will be met with further price increases. Although his comments were mixed, they led to buys in the S&P 500 and Bitcoin
on February 7, as investors predicted that the Fed may soon end its campaign to raise interest rates.
Bitcoin’s strong rally in January and signs of abating inflation seem to have tipped investor sentiment. CoinShares data on January 30 shows that institutional investors poured $117 million into digital investment products. This brought total assets under management to $28 billion, up sharply 43% from its November low.
Daily cryptocurrency market performance. Source: Coin360
Although sentiment seems to have turned around, bear markets rarely end without correcting the rally from the bottom. The price needs to form a higher low, followed by a higher high, to confirm a possible change in trend.
What critical support levels on bitcoin and altcoins can stop future declines? Let’s study the charts of the top 10 cryptocurrencies to find out.
Bitcoin fell below $22,800 on February 6 but the bulls bought the dip. That started to rebound above $23,000 on Feb 7 but buyers were unable to sustain the higher levels.
BTC/USDT daily chart. Source: TradingView
It is not likely to be easy for the bulls as the bears will try to mount a strong challenge on every rally towards $24,000. Although the bullish moving averages indicate an advantage for the buyers, the negative divergence on the Relative Strength Index (RSI) indicates that the bullish momentum is slowing.
Sellers are trying to corner the aggressive bulls by dragging the price below the 20-day exponential moving average ($22,568). If they can do so, the BTC/USDT pair may give up some of its recent gains and drop to $21,480. Buyers are likely to defend the area between $21,480 and the critical psychological level of $20,000.
It bounced off the 20-day moving average ($1,600) on Feb 7. The bulls tried to consolidate their position by pushing the price above the $1,680 resistance on February 8, but were unable to sustain the breakout.
ETH/USDT daily chart. Source: TradingView
This indicates that the bears are active near the $1,680 resistance level. Sellers will try to plunge the pair below the 20-day moving average. If they succeed, the ETH/USDT pair could drop to $1,500. Sellers will have to break this support to seize control.
Conversely, if the price rises and rises above $1,700, the pair may signal the beginning of the next phase of the bullish trend. There is a minor resistance at $1,800, but the possibility of a rally to $2,000 increases if the bulls do not allow the price to fall back below $1,680.
The bulls successfully defended the $318 breakout level on February 6, which is a positive sign as it shows that buyers are not waiting for a deeper correction to buy. The bulls will now try to push BNB
BNB/USDT daily chart. Source: TradingView
If they can achieve that, the potential for a rally to $360 improves. The bears are expected to build a strong defense at this level but if this barrier is overcome, BNB/USDT could extend the upward move to $400.
Conversely, if the price declines and drops below $318, it will indicate that the bears are selling the rallies. This could trap aggressive bulls and increase the risk of a fall to the 50-day SMA ($284).