Currently, Bitcoin is trading at $381 on Bitstamp after hitting a low of $376 and a high of $395. In our last technical analysis, we discussed that Bitcoin’s price is facing a potential breakout because of the inverse head and shoulders formation. However, the actions in the past hour have discredited that assumption as the price dropped sharply by $15 in a matter of minutes.

Looking at the 30 minute chart on Bitcoinwisdom we can see a triple bottom formation.

A triple bottom pattern is usually used to predict the reversal of a prolonged bearish trend. After the drop from $465 to $355 earlier this month Bitcoin has been facing a great deal of downward pressure, this latest round of dumping may be the weak hands getting out and the strong hands entering a long position. Remember, it is never a good idea to make trades on emotion so if you were holding bitcoin and missed your chance to sell before the slide selling now to cut your losses may be too late. Unless the price tanks further to test the $356 support, which is highly unlikely given that the market bounced off three times from the $371 support line, it is a good idea to wait and see how much the price will recover before cutting your losses and getting out.

One reason why Bitcoin’s price isn’t rising could be attributed to the recent altcoin pump action going on. If you are a poster on r/Bitcoin you probably have noticed messages with subjects like: can I ask something, Hello, I saw your post the bitcoin reddit, can I get your opinion on this, etc. The context of the messages usually praises an altcoin, in most cases ethereum. If you haven’t already cashed out on the recent pump then it would be a very risky decision to buy in now. Magikarpeles

Serious amount of pumping going on in the alt-verse. I hope no one thinks it’s anything more than P&Ds, because anyone that’s been around in crypto for a few years well tell you – if you put your money based on the hope your coin is “the next bitcoin”, you’re gonna have a bad time.

FOMC statement signals positive pressure for riskier markets

Another important piece of news which suggests further positive pressure for bitcoin is coming is the recent FOMC statement. The Federal Open Market Committee is a board of governors that compose the current monetary policy. In their statement last month they increased interest rates by 0.25%, however they left the rate unchanged for the month of January.

An interest rate increase means that the Fed is confident in the economy and in banks to be able to handle larger borrowing costs. In the statement last month the FOMC mentioned that household spending was increasing at a good rate, thus deciding to increase the interest rates. However, this month the statement read that household spending was increasing at a fair rate. Because of the decline in household spending the Committee believes that the economy did not do as well as last year and decided to hold off on increasing the rates just yet.

A fast interest rate increase is bad news for stocks, because it strengthens the dollar. Not surprisingly, back in November Goldman Sachs predicted that the stock market will suffer atleast 10% as a direct result of the Fed rate increase coming in December. On the other hand, a slow and steady interest rate increase means that investors will be more inclined to invest into other higher risk assets such as Bitcoin.

Proceed with caution

With developers leaving and declaring Bitcoin dead with banks to support them and the bill in Russia that is trying to ban bitcoin, the volatility this month comes to no surprise. In addition, the current altcoin pump detracts from the bitcoin price because people sell btc for altcoins causing further downward pressure. We all know that most altcoins heavily follow Bitcoin’s price, but we may be underestimating the impact that altcoins have on bitcoins. Due to the current volatility it is much safer to stay in fiat, however, for those risk takers now might be a good time to enter a position.

If you liked this article follow us on twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin and altcoin price analysis and the latest cryptocurrency news.

Disclaimer: This is not trading or investment advice. Please do not make any trades solely on advice given in this article, use your own research and technical tools to make a decision.