As a follow-up to last week’s article, this piece will be going over cryptocurrencies to watch this week (BTC, ETH, and XRP). Affecting the market recently was the consumer price index, which tracks a broad swath of goods and services. It increased 0.1% over the past month and 8.3% over the past year. If you exclude volatile food and energy costs, the CPI rose 0.6% from July and 6.3% from the same month in 2021.
The CPI index is the most important economic event when it comes to inflation predictions.
In theory, when the CPI comes out higher than expected, it means that inflation is rising faster than market expectations. Therefore, as people have less buying power, they purchase less. As a result, high-risk markets such as equities and cryptocurrencies usually end up going down, which is exactly what happened with this month’s CPI.
Just before the CPI numbers came in, bitcoin was close to breaking its strong resistance level at around $23,000 (an area on the charts where sellers were stronger). However, when the CPI data came higher than expected, the flagship currency fell off a cliff.
Bitcoin fell around 13% in the last week, all the way down to the strong support area at $18,500 (an area on the chart where buyers were stronger). Since then, the price has managed to recover a bit as the $18,500 level held strong, and a lot of buying power came into the market to push the price higher. Currently, bitcoin sits at around $19,200.
If the selling pressure continues this week, bitcoin can visit its final area of support at around $17,500. However, if the buyers keep coming in, the next resistance area for bitcoin is set to be around $23,000.
This was a historical week for Ethereum, as the long-awaited merge was finally completed. There was a lot of chatter within the crypto community regarding what may happen after the merge. Will a strong sell-off be seen, or a rally to the upside?
Eventually, despite the successful merge and following the higher-than-expected CPI numbers, Ethereum sank from around $1,700 all the way down to the strong support area that was mentioned last week ($1,300).
As of now, Ethereum is still in a consolidation stage between the support of $1,300-$1,500 to the resistance of $1,700-$1,800. In order for traders to get a clearer understanding of which direction the cryptocurrency is going from here, they need to keep a close eye on if one of these ranges gets broken.
A break above $1,700 may take Ethereum to the next resistance at $2,000, while a break below $1,300 could make the cryptocurrency melt down to the next support level at around $1,100.
Despite the harsh market conditions affected by the CPI numbers, Ripple’s XRP managed to decouple itself from the market, rising about 1% in the last seven days.
XRP is still down around 60% from where it was a year ago, yet last week started with another retest to the strong support area at $0.32. However, this time, buyers came in strongly, pushing the price up to over $0.35.
At writing, XRP is trading at around $0.35, not far away from the next weekly resistance at around $0.45. This level has not been breached in four months, and if buyers are strong enough to break it this time, XRP may reach the next resistance level at $0.50.
XRP is famous for pumping hard and then dumping all the way back down. Therefore, traders need to watch for the support level at $0.32 to hold.
Conclusion: There’s a Potential Rally on Its Way
If you have followed my breakdowns over the past couple of weeks, you will be aware that, at the moment, I believe the market is still in a bearish trend. However, I’m also keeping a close eye on the fact that the lows of June 18 are still holding on, and buyers still seem to come into the market at higher prices.
I will be waiting patiently for Wednesday, September 21, when the Federal Reserve is due to release its interest rate decision. This will be the last rate meeting for the next two months, so I believe that once they’re out, the market will be able to breathe and show us a more precise direction for its next move.