A rebound to 25,000 cannot be ruled out

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Bitcoin and other cryptocurrency prices rebounded overnight as investors focused on the upcoming Ethereum merger.

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Bullish view

  • Buy the BTC/USD pair and set a take-profit at 24,000.
  • Add a stop-loss at 20,500.
  • Deadline: 1 day.

Bearish view

  • Set a sell stop at 21,000 and a take profit at 19,000.
  • Add a stop-loss at 24,000.

BTC/USD price continued to rally as investors focused on the upcoming Ethereum merger and US inflation data. It hit a high of 22,500, the highest level since Aug. 19. It is also up more than 22% from last week’s low.

Cryptocurrencies rebound

Bitcoin and other cryptocurrency prices rebounded overnight as investors focused on the upcoming Ethereum merger. This merger, which is the biggest event in the blockchain industry, will see the platform transition from a proof-of-work (PoW) platform to a proof-of-stake (PoS) platform.

By becoming a PoS platform, it will adopt technology that has been used by many fast-growing blockchains like Avalanche, Cronos, and Cardano. This will also set the stage for other future upgrades such as sharing.

Historically, cryptocurrencies have a close correlation with each other. As such, they tend to work in sync during a major event. For example, most cryptocurrencies performed well in 2021 before the Bitcoin halving event.

The BTC/USD pair also retreated due to the relative weakness of the US Dollar. The closely watched US Dollar Index has fallen from last week’s high of $110.5 to $108.12 currently. It fell as investors cut their inflation outlook for the US economy.

Economists expect the data set to be released on Tuesday will show the headline consumer price index (CPI) rising from 8.5% in July to 8.1% in August. Inflation is likely to have fallen much lower due to the strength of the US dollar and lower oil prices.

Thus, if inflation continues to decline, it is likely that the Federal Reserve will slow down its interest rate hikes over the next few months.

This view explains why the US dollar fell as US equities staged a strong rally. The Dow Jones rose 200 points while the Nasdaq 100 jumped 140 points.

BTC/USD Forecast

The four-hour chart shows that the BTC/USD pair has been on a strong uptrend for the past few days. As it moved higher, it managed to break above the important psychological level at 20,000. It also broke above the important resistance level at 21,952, which was the highest level on August 24th.

The pair moved above the 25-day and 50-day moving averages. Therefore, the pair will likely continue higher as the bulls target the next key resistance level at 24,000.

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