Key Points
- Bitcoin’s price plummeted to $91,170 on Monday due to potential stagflation risks in the U.S.
- Despite the crash, Bitcoin’s price could rebound due to its recent trend of ending the week positively after a Monday drop.
Bitcoin’s value dipped significantly to $91,170 on Monday. This drop was in tandem with a general decline in cryptocurrencies and the stock market.
The decrease in Bitcoin’s value was primarily influenced by the looming threat of stagflation in the United States and its potential impact on the Federal Reserve.
Impact of Tariffs on Bitcoin
The U.S. has seen the introduction of extensive tariffs on goods from America, Canada, and China by Donald Trump. These tariffs could potentially lead to an increase in inflation as companies may be forced to raise their prices. Consequently, inflation is likely to stay above the 2% target for a longer period.
These tariffs could also have an impact on consumer spending, a significant part of the economy. Consumers may decide to delay major purchases until there is more clarity on the tariffs and the result of possible negotiations.
As a result, the Federal Reserve might maintain high interest rates for a longer period, affecting risky assets like Bitcoin and stocks.
Bitcoin Price Rebound
The drop in Bitcoin’s value led to a surge in liquidations, with exchanges closing leveraged bullish positions as it fell. Daily liquidations reportedly jumped to nearly $400 million, marking the highest level in weeks.
However, there are several reasons why Bitcoin’s price might rebound after Monday’s crash. Firstly, it has shown a trend of ending the week positively when it falls on a Monday.
Secondly, historical data indicates that Bitcoin usually sees a rise in February. It has seen an increase in February for the last four consecutive years. The average returns in February since 2013 is about 14%, making it the second-best month after November.
Lastly, it is expected that Trump will use the threat of tariffs to negotiate a better deal than he did in his first term. Therefore, cryptocurrencies and stocks may rebound when trade talks begin, possibly this month.
Bitcoin Price Forecast
The daily chart shows that Bitcoin’s price has been moving sideways in the past few months. It fell to a low of $91,170, a critical point where it has failed to drop below since November. This consolidation has led to the formation of a bullish flag pattern, comprising of a long vertical line and a rectangle pattern.
Bitcoin’s price has also remained above the 50-day and 100-day Exponential Moving Averages. Therefore, it is expected to have a strong bullish breakout later this month, with the initial target being the year-to-date high of $109,200.
