Bitcoin (BTC) fell over 10% last week, its biggest drop in two months. Analysts say the price slide has put bears in control ahead of the U.S. Federal Reserve's annual economic symposium in Jackson Hole, Wyoming, on Friday.
Bitcoin's drop has broken technical charts and revived the bearish trend, according observers.
"Last week's slide has put the bears in the driver's seat. The market will take a while to reverse and would need good news," trader and analyst Alex Kruger told CoinDesk, adding that Fed Chair Jerome Powell is unlikely to offer good news later this week.
According to David Duong, head of institutional research at Coinbase, bitcoin's daily technical chart has flipped bearish and the cryptocurrency could continue to lose ground in the short term.
"BTC will likely retest support at $20,830 and $19,230 over the coming few weeks," Duong noted in the weekly markets commentary, adding that traders will be closely watching Powell's comments at the Jackson Hole symposium.
After last week's Fed minutes, there seems to be a consensus in the market that Powell will skew on the hawkish side during the Jackson Hole Economic Symposium. The annual gathering, sponsored by the Federal Reserve Bank of Kansas City, hosts central bankers, finance ministers, academics and financial market participants.
"Fed Chair Jerome Powell will likely try to take a more measured approach in Wyoming and emphasize that the tightening cycle isn't over yet," Duong noted. The Fed's monetary tightening has roiled the cryptocurrency market this year.
Michael Kramer, the founder of Mott Capital Management, wrote in a weekly markets update, "I would expect that Powell lays out quite clearly that the pace of future rate hikes may slow but that they have much further to climb and are likely to remain high for some time."
The Fed said in July that it would be appropriate to slow tightening at some point, triggering a relief rally in risk assets. However, according to Dean Peng, VP at Singapore-based digital asset management platform Metalpha, monetary policy operates with a lag. So, the central bank will likely stick to its hawkish script at least for some time.
The effect of higher interest rates on inflation will be evident in about six months. Peng said. "It is still too early to put in more calls for bitcoin at this time."
The Fed has plenty of room to maintain the pro-tightening bias for some time, as conditions in the nearly of the U.S. financial markets have loosened since mid-June.
Tighter economic conditions are widely seen as a sign of growth slowdown and vice versa. The tighter the conditions, the more challenging it is for the central bank to drain liquidity from the economy without restricting growth.
While bitcoin's short-term prospects look bleak, most of the downtrend has likely played out. "Medium to long-term perspective, the current market is at the bottom of the Kitchin cycle, and the bottom-building process will recur over the next few months," Metalpha's Peng said.
CORRECTION (18:30 UTC): This article has been corrected. A previous version contained an inaccurate spelling of Dean Peng's name.
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