Bitcoin Price Prediction Ahead of US-Iran Deal to Reopen Strait of Hormuz

Key Insights

• Bitcoin price has rebounded modestly this week.
• There are hopes of a US-Iran deal to reopen the Strait of Hormuz.
• Technicals suggest that the coin may resume the downtrend.

Bitcoin price held steady above the key resistance of $63,000 as traders cheered the falling tensions between the US and Iran. BTC has now jumped by 8.6% from its lowest point this year. So, will the coin continue rising or resume the downtrend if the US and Iran reach a deal to reopen the Strait of Hormuz?

Bitcoin Price is Rising as Hopes of a US-Iran Deal Rise

BTC price held steady on Friday after President Donald Trump lowered the temperature in the ongoing US-Iran crisis. In a statement on Thursday, he warned that the US would accelerate its attacks against Iran, with the ultimate goal of controlling the country’s oil.

Precisely, Trump said that the US would seek to take Kharg Island, where Iran transports most of its oil resources. Such a move would be a major escalation as Iran has threatened that it would retaliate. Its retaliation would include actions like closing the Red Sea and attacking oil infrastructure in the region.

Trump, after talking with regional allies, decided to cancel the attacks. Instead, he hinted that the US will pursue a deal with Iran, which may be signed as soon as this weekend.

According to Bloomberg, the deal will likely have several components, with the most important one being the reopening of the Strait of Hormuz. Iran will agree to reopen the Strait, while the US will end its blockade.

In exchange, Iran will receive half of its frozen funds, suspension of oil sanctions, and the withdrawal of all American forces from Iran. Also, the deal will include a $300 billion reconstruction fund for Iran. This deal may be signed in Zurich on Sunday this week.

However, there is a risk that the two sides will not reach an agreement. For one, the proposal includes a financial settlement for Iran, something that Trump, his allies, and Israel will reject.

A Deal Would be Bullish for Risky Assets

Still, a deal would be highly bullish for Bitcoin and other risky assets. For one, it will lead to lower energy and fertilizer prices. Indeed, data shows that Brent and the West Texas Intermediate (WTI) dropped to $88 and $85, respectively.

Lower prices would lead to lower inflation in the United States and make it easy for the Federal Reserve to cut interest rates. Data released this week showed that the headline Consumer Price Index (CPI) jumped 3.8% in May, while the Producer Price Index (PPI) soared to 6.4%. If this rise continues, the Fed will need to hike rates, which will push investors to value assets.

Still, Bitcoin faces some major risks ahead. For one, data shows that ETFs tracking the fund have shed billions of dollars this year. They suffered $19 million in outflows on Thursday, bringing the month-to-date outflows to over $2.12 billion. They also lost over $2 billion last month as investors capitulated following months of underperformance.

BTC Price Technical Analysis

The daily chart shows that the BTC price has crashed in the past few months. This retreat culminated in the coin plunging to a low of $59,090 last weekend. It has now remained below all moving averages, a sign that a bullish breakout has not happened yet.

The coin is slowly forming a bearish pennant pattern, which is made up of a vertical line and a triangle pattern. This pattern normally precedes a strong bearish breakout.

Therefore, there is a likelihood that the ongoing rebound is part of a dead-cat bounce (DCB). A DCB is a situation where an asset in a freefall makes a temporary rebound. If this happens, the coin may fall further to $50,000 in the near term. The bearish outlook will become invalid if it moves above $70,000.

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