The Bitcoin price briefly dipped to fresh mid-March lows around $38,100 on Monday before bouncing strongly on a daily closing basis. In the process, BTC/USD managed to regain the $40,000 psychological level, shrugging off some of the early weakness.
However, it looks like the most popular cryptocurrency would struggle to stage a more robust recovery in the near term as investors remain cautious these days while monitoring developments in the traditional financial markets.
Sentiment in stock markets has improved somehow since yesterday, with major Asian and European indexes reversing previous losses. Still, the bounce is more like a technical correction following the recent plunge as the fundamentals stay downbeat. In particular, the Federal Reserve continues to signal more aggressive steps ahead of next week’s policy meeting, making investors worried about the outlook for the economy.
In China, rising COVID cases make local authorities announce fresh lockdowns, suggesting consumer demand would decline in the coming weeks or even months. Meanwhile, geopolitical tensions surrounding Ukraine continue to rise, adding to market worries.
As cryptocurrencies tend to move in tandem with traditional riskier assets of late, the outlook for bitcoin still looks downbeat at this stage. Despite a solid bounce from multi-week lows, BTC will hardly be able to extend recovery and confirm a reversal anytime soon.
In other words, the path of least resistance remains to the downside at least in the short term. In this context, the $38,000 mark would be in the market focus in the days to come, with bitcoin hovering near that level currently.
The bearish potential for bitcoin is limited while above this support zone. Should the coin derail the significant level, the BTC/USD pair may target the March low of $37,145. In other words, it looks like the digital currency could see some deeper losses before a reversal takes place.