Key Points
- Bitcoin price remains steady above $95,550, despite a dip in American stock indices and exchange-traded funds.
- Bitcoin and other cryptocurrencies typically perform well when the Federal Reserve adopts a dovish tone.
Despite major American stock indices and exchange-traded funds experiencing a decline, Bitcoin price has managed to maintain its position above $95,550.
Bitcoin (BTC) was last seen trading above $96,550 on Saturday morning. This comes after a particularly bad day for U.S. equities.
Stock Indices and ETFs Take a Hit
The S&P 500 index, a well-known blue-chip index, saw a drop of 1.71%. The Nasdaq 100, which is heavily tech-oriented, fell by 2%, wiping out 455 points. The Dow Jones and the Russell 2000, which focuses on small-cap stocks, also took a hit, falling by 1.70% and 3% respectively.
The Schwab US Dividend Equity ETF, also known as the SCHD, fell by 0.5%. This ETF tracks some of the biggest value stocks in the U.S. and is a favorite among dividend income investors.
Several technology stocks, including Nvidia, Apple, Microsoft, and Meta Platforms, were among the top losers. The CNN Money fear and greed index remained in the fear zone at 35, while the crypto fear and greed index shifted to the greed area at 38.
Market Risk Factors
Bitcoin and American equities have both seen a retreat due to increased market risk. This risk is linked to President Donald Trump’s tariffs and the policies of the Federal Reserve.
Minutes from a recent Fed meeting revealed that most officials are in favor of maintaining a restrictive policy due to persistently high inflation. Data released earlier this month showed that both the headline and core consumer price index had risen to 3% and 3.3% respectively in January, moving further away from the 2% target.
Cryptocurrencies like Bitcoin tend to thrive when the Federal Reserve adopts a dovish tone. For instance, they suffered a crash in 2022 when the bank raised rates, but saw a rebound between 2023 and 2024 as the bank began to pivot.
Investors are also worried about the potential for more market risks due to tariffs. Trump has already enforced tariffs on imports from China, and tariffs on Canada, Mexico, and steel and aluminum are set to begin in March. There are also considerations for levies on European goods.
These higher tariffs could potentially lead to stagflation, a period characterized by high inflation and a slow growth rate. This is a challenging period as interest rate hikes to curb inflation result in slow economic growth, while rate cuts can trigger higher inflation.
Bitcoin’s Potential Rebound
Despite these challenges, there are indications that Bitcoin’s price could see a strong recovery in the coming weeks. The weekly chart shows the formation of a bullish flag pattern, which typically precedes a strong bullish breakout.
Previously, the Bitcoin price formed a cup-and-handle pattern. The depth of this cup was about 78%, suggesting a BTC price target of around $121,590. This target is calculated by measuring the distance from the top side of the cup.
