Bitcoin Price Crash: What You Need to Know

On Monday, the Bitcoin price crashed to a low of $91,170, marking a significant drop in the cryptocurrency market. This decline was largely attributed to potential stagflation risks in the United States and their impact on the Federal Reserve. The Bitcoin price fell by over 16% from its highest level this year, moving into a technical correction.

Potential Stagflation Risks and Tariffs

The drop in Bitcoin price was primarily caused by the unveiling of wide-ranging tariffs on American, Canadian, and Chinese goods. These tariffs are likely to lead to higher inflation as companies are forced to hike prices, causing the headline and core inflation to remain above the 2% target for longer. Additionally, the tariffs may impact consumer spending, which is the biggest part of the economy, leading to a potential decrease in big purchases until clarity on the tariffs and negotiations is achieved.

Impact on the Federal Reserve and Interest Rates

The Federal Reserve may maintain higher interest rates for longer, affecting risky assets like Bitcoin and stocks. This could lead to a continued decline in the Bitcoin price and other cryptocurrencies.

Reasons for a Potential Rebound

Despite the recent crash, there are three main reasons why the Bitcoin price may rebound:

  • Historical data shows that Bitcoin tends to end the week positively in recent weeks when it falls on a Monday.
  • Seasonality data indicates that Bitcoin usually rises in February, with an average return of about 14% since 2013, making it the second-best month after November.
  • It is likely that Donald Trump will use the threat of tariffs to negotiate a better deal, causing crypto and stocks to rebound when trade talks start, possibly this month.

Bitcoin Price Forecast

The daily chart shows that the Bitcoin price has moved sideways in the past few months, dropping to a low of $91,170, a key 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.

The Bitcoin price has also remained above the 50-day and 100-day Exponential Moving Averages. Therefore, it will likely have a strong bullish breakout later this month, with the initial target being the year-to-date high of $109,200.

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