Dow Jones futures bounced back on Friday despite hawkish comments from Fed Chair Jerome Powell, extending a choppy rally attempt. The major indexes snapped three-week losing streaks, with the Nasdaq gaining 2.3%. However, stocks reversed sharply on Thursday from the 50-day line. Leading AI stock Nvidia jumped 6.3% for the week but well off highs. Tesla and software plays Salesforce.com and ServiceNow report next week. All this market action has significant implications for Bitcoin.
The cryptocurrency hit a 2022 low in June but rebounded 50% into mid-August as stocks rallied. However, Bitcoin has turned choppy again along with equities. BTC retreated modestly last week back below $21,500. So what's next for Bitcoin with the Dow Jones pointing to an uncertain market?
In the near-term, Bitcoin will likely continue tracking stocks. If the Dow and S&P 500 can break above their 50-day lines decisively, Bitcoin could make a run toward the $25,000 level. However, if the market rally attempt falters and indexes reverse lower, BTC could retest 2022 lows around $17,600.
Longer term, tightening Fed policy and Treasury yields remain a headwind for Bitcoin. But if inflation continues to ease, markets may see the Fed pausing rate hikes in early 2023. That could be a catalyst for a sustained Bitcoin and stock market rally.
Will Stocks Break Out or Break Down?
All eyes are on whether stocks can overcome stiff 50-day line resistance. The Nasdaq shows some relative strength, but tech leaders like Nvidia struggling is a concern.
If the Dow and S&P 500 can close decisively above their 50-day lines, it may signal improving market health and draw more buying power. In that scenario, Bitcoin could ride higher toward the $25,000 zone.
But if stocks reverse lower, especially undercutting recent lows, it would signal the rally attempt has failed. Renewed market weakness could send Bitcoin back toward the June lows.
So in the week ahead, Bitcoin bulls want to see stocks gain ground and break out past short-term resistance. Bears are hoping for a failed breakout and reversal.
Key Earnings To Watch
Several notable earnings next week could influence whether stocks break out or break down:
Salesforce.com - The software leader delivers results on Wednesday. CRM stock is trying to rebound from its 50-day/10-week lines. Earnings could spur a breakout or drive a breakdown.
NVIDIA - The AI chip powerhouse crushed Q2 earnings and guidance last week, but the stock reversed hard from record highs. Keep an eye on how NVDA acts post-earnings.
Snowflake - The cloud-data platform reports Thursday. Strong results could boost software names.
Broadcom - Chips remain a key earnings watch. The software-focused chipmaker reports Thursday.
Fed Remains On Track For More Rate Hikes
Despite any near-term stock market breakouts or breakdowns, the Federal Reserve remains determined to bring down inflation through tightening policy.
Markets are now betting on another 75 basis-point rate hike at the September 20-21 Fed meeting to the 3.75%-4% range.
So while stocks and Bitcoin may see short-term rallies, the Fed's monetary policy posturing will limit upside until inflation makes substantial progress toward the 2% target.
Bitcoin Outlook For Rest of 2022
If stocks can decisively break above 50-day lines, Bitcoin could test $25,000 resistance heading into September. From there, rally attempts may struggle with tightening policy acting as a lid on meaningful upside.
But if equities reverse lower, Bitcoin could quickly give up recent gains and revisit the risky $17,500-20,000 zone. That could spark another wave of liquidations and force more drawdowns.
Unless inflation moderates significantly, allowing the Fed to pause rate hikes, the Bitcoin outlook remains murky through year-end. BTC may be rangebound between $17,500-$25,000 until there is more policy clarity.
Upside appears limited given macro headwinds. But significant downside risks remain as well if stocks break down.
Longer Term Bitcoin Price Predictions
Looking beyond 2022, inflation and Fed policy remain the key factors determining if Bitcoin can start a new sustained uptrend.
Here are two potential scenarios for 2023 and price predictions:
- Stubbornly high inflation - If price pressures only come down slowly over the next 6-12 months, the Fed may be forced to hike well into 2023, perhaps above 5%. In this scenario, BTC likely remains rangebound in the $17,500-$25,000 zone. Breaks below $17,500 would signal additional drawdowns and test lower support levels.
- Rapid inflation easing - However, if inflation falls back toward 3% quickly in early 2023, markets would likely price in a Fed pause by Q2. This would be very bullish for stocks and Bitcoin. BTC could breakout toward the $40,000-$50,000 zone on a combination of Fed pivot hopes and safe haven buying if the economy weakens.
So Bitcoin's path ultimately depends on how sticky inflation proves to be. But any sustained 2023 rally may require clear signs of inflation easing back toward normal levels.
How Will Next Week Influence Bitcoin Outlook?
Can stocks break above 50-day lines or will they break down? How will key earnings impact sentiment? What's the latest inflation and Fed policy outlook?
Next week could have a profound influence on whether the Dow and Nasdaq break out or break down, clarifying Bitcoin's near-term direction.
If stock rally attempts show renewed strength, Bitcoin could make a run toward resistance around the $25,000 level. That would offer some relief for battered bulls.
But if equities reverse lower, especially undercutting last week's lows, it would signal this choppy bounce has failed. That breakdown would likely drag Bitcoin back toward the ominous $17,500-20,000 zone.
So keep a close eye on market signals heading into September. Whichever way stocks break, Bitcoin is sure to follow.