In his August 27 speech, Fed Chairman Jerome Powell said that the central bank would allow inflation to remain above the 2% target level if the number is below that level for an extended period. Some analysts believe this may mean no rate hike for at least five years.
In response to the speech, the US dollar index (DXY) has resumed its bearish trend while gold is in the black zone. This indicates that traders believe that changing the central bank’s strategy could further weaken the dollar, which is why the demand for gold as a store of value remains intact.
Gemini co-founder Tyler Winklevos believes that Bitcoin (BTC) will eventually overtake gold as a store of value due to its inherent advantages. The current market value of Bitcoin is just over $ 200 billion, while the market value of gold is around $ 9 trillion. This means that Bitcoin will have to increase 45 times to $ 500,000 to achieve the desired goal, according to Winklevoss.
It is unlikely that such a significant rise in the price of Bitcoin would occur without the participation of institutional investors. Fortunately, recent developments show that institutional demand has rebounded in 2020.
To attract big ticket buyers, Fidelity has introduced US regulators to launch a new Bitcoin fund for institutional clients. Even if institutional investors only put 1% of their money into Bitcoin, it could trigger a spike.
Is this the right time for retailers to consider buying, or can the cryptocurrency market enter a correction period? Let’s study the graphs to find out.
Bitcoin / USD
Despite Bitcoin trading below the 20-day exponential moving average ($ 11,530) for the past two days, the bears were unable to bring the price down below the $ 11,000 support level, indicating that the bulls are buying on dips.
The 20-day EMA has flattened and the RSI is close to its midpoint, indicating a balance between supply and demand.
If the bulls manage to push the price above the 20 day EMA, then a re-test of general resistance at $ 12,113.50 is likely. The next uptrend should start after the bulls carry the BTC / USD above the $ 12,113.50 resistance level to $ 12,460.
On the contrary, the bears will once again attempt to bring the price below the $ 11,000 support level if the pair falls from $ 12,113.50. If successful, critical support could be retested at $ 10,400. A breakout below this level would be extremely negative.
ETH / USD
The bulls are aggressively defending the support of USD 366, which is a positive sign. If they manage to keep the price above the 20-day moving average ($ 392), then ETH could rise to $ 415.634 and above to the $ 446.479 resistance.
ETH / USD daily chart. Source: TradingView
The 20 day moving average is fixed and the RSI is just above the 50 level, indicating the balance between supply and demand. Break above $ 446.479 should resume uptrend with next target of $ 480.
Conversely, if the bears defend strongly against the $ 415,634 resistance, the Ethereum / USD pair might drop to $ 366. Such a move would be a major drawback as it could create a bearish head and shoulders pattern and increase the likelihood of a deeper correction.
XRP / USD
XRP fell below $ 0.268478 support on Aug 27, but the bulls bought the decline to the 50-day simple moving average ($ 0.255), indicating demand at lower levels.
For now, the buyers are trying to push the price back above $ 0.268478. If successful, it is possible to switch to a 20-day EMA ($ 0.28). This level should act as strong resistance, but if buyers can measure the price above it, it will likely move to $ 0.326113.
However, if the XRP / USD pair diverges from the 20-day moving average, the bears will try to break the 50-day SMA support, and if this succeeds, a drop to the 61.8% Fibonacci retracement level at $ 0.241068 is possible.
With the 20 day moving average falling gradually and the RSI in negative territory, the advantage is the bears.
Link / USD
Chainlink (LINK) has been hovering around the 20 day moving average ($ 14.56) for the past few days and has formed a symmetrical triangle pattern indicating indecision.