By Samuel Indyk
Investing.com – Bitcoin was trading relatively flat near $38,000 on Wednesday morning as the apex cryptocurrency continues to find resistance at a downward trendline.
Bitcoin traded as high as $38,850 on Wednesday before edging slightly lower.
On the chart, you can see that Bitcoin has been testing the downward trendline that has been visible since hitting the record high in November but has so far failed to move above that level.
To move above the trendline today, Bitcoin would need to trade back above $39,000.
If Bitcoin fails to move above the threshold then the largest cryptocurrency by market cap could end up retreating back towards support at $35,000.
A break below that level would then open the door to the January low which was just below $33,000 before a move towards the psychological threshold of $30,000.
A break above the downward trendline and $40,000 could see the bearish trend that has been in place since the November high reversed.
Central banks in focus
The Bank of England and European Central Bank are both set to announce monetary policy decisions on Thursday.
With Bitcoin continuing to trade like a risk-asset, OANDA Senior Market Analyst Edward Moya expects these central bank meetings will have a greater impact than usual.
“The BoE and ECB rate decisions might have a larger impact on cryptos than normal as Wall Street is looking for a cue on which direction risk appetite is headed,” Moya said. “A lot of January data in the US is expected to be soft and that should continue to support the Fed’s growing chorus of members that want an interest rate increase cycle that does not disrupt the economy.”
Risk appetite has improved in recent days as Fed officials attempt to tame expectations of more aggressive rate hikes. One of the more hawkish FOMC members, St Louis Fed President James Bullard, said that he would not favour a 50 basis point rate increase in March, although would favour successive rate increases in March, May and June.