After suffering its biggest drop since November 2022, Bitcoin started the new week on a rocky note.
In a sharp pullback from ten-month highs, BTC/USD is down about 10% before the weekly candle closes.
BTC/USD is currently trading around $27,600, the culmination of several dismal days for traders, which means that BTC/USD is currently struggling to win last month’s support.
Market participants are in two minds about what’s next — some are betting on a deeper downtrend, while others are still confidently retesting multi-month highs.
The likely catalyst is U.S. macroeconomic data due later in the week, while markets brace for the Federal Reserve’s next interest rate decision.
With the recent correction taking the “greed” out of crypto sentiment, can the shock give way to a more sustainable uptick, or at least the current bull market is over?
Let’s take a look at the data and opinions behind the current BTC price action.
BTC price struggles for support amid warnings of ‘bigger correction’
Bitcoin ended the week at $27,600, the most damaging week since the FTX crash last November, according to TradingView data.
BTC/USD 1-week candlestick chart (Bitstamp). Source: TradingView
BTC/USD now faces a big decision – hovering around the current support level around $27,000, which was also the focus in March, or breaking through.
“Spot fees are back where they were when BTC was trading at this price. Funding rates are slightly negative. Nothing crazy yet,” popular trader Daan Crypto Trades concluded in a tweet.
Trader Tony Tony maintained his $26,600 target, while Caleb Franzen, senior market analyst at Cubic Analytics, said BTC would have to return to higher levels for the bulls to gain the upper hand.
“Bitcoin has been unable to break and sustain above $27,820 (green range), the key level I share,” he explained alongside the chart. “For the short-term momentum to shift in favor of the bulls, I think we need to see prices move up (and sustain) above that range. It continues to act as resistance…”
BTC/USD chart.Source: Caleb Franzen/Twitter
Meanwhile, the latest data from the Binance order book shows an increase in resistance to $28,000.
According to monitoring source Material Indicators, this is an attempt to drive down spot prices in order to meet bids at more attractive levels.
#FireCharts Show a new query liquidity suppression block #bitcoin price, possibly trying to push the price up into the $27,300 to $26,700 range. #NFA pic.twitter.com/ThOwqUT09R
— Material Indicators (@MI_Algos) April 23, 2023
On the more cautious side, trader Mark Callan predicted the worst was yet to come.
“A nice bearish flag formed over the weekend and looks correcting to the downside at the same time as price rises and H4 bearish divergence forms,” he tweeted. “I think before a bigger correction in Bitcoin , the range low will be swept.”
BTC/USD chart.Source: Mark Karen/Twitter
PCE data combined with the market “pricing” the Fed’s new round of interest rate hikes
This week’s macro triggers will mainly come from corporate earnings reports and economic data from the US.
These will focus on GDP and jobless claims on April 27, and March data on the personal consumption expenditures (PCE) index a day later.
Corporate earnings reports will continue to be released, while the Federal Open Market Committee (FOMC) meeting in May is pending, when the Fed will decide on further interest rate adjustments.
Chairman Jerome Powell has confirmed that the ability to tamper with macro data has had a major impact on the decision, with markets in “wait and see” mode until final data becomes available.
However, according to the CME Group’s FedWatch tool, there is now an overwhelming majority in favor of another rate hike, putting further pressure on Bank of America and the broader financial system.
The chance of adding 0.25% is now 85%.
Fed target rate probability chart.Source: CME Group
Investor Crypto Awakenings commented: “Expectations high for a +25bp rally at next FOMC meeting, but volatility is unreliable.” “Powell’s pause statement could trigger Bitcoin price break above 30K Above the dollar. If a rate hike is announced, the market may have already priced in and confirmed that ‘sell in May and go’ will not happen in 2023. There may be a pause. May or July, most likely May.”
Likewise, trader Ash WSB drew attention to the fact that the market may have “priced in” a rate hike in May, suggesting that if the Fed does raise rates, surprises are less likely.
BTC 4-hour trading in a downtrend
Last 3 days after reaching $31,000.$27,700 and $26,600 matter
Support on the chart.The FOMC will meet on May 3, and it looks like
The market has already priced 25BPS pic.twitter.com/TDGG4bsquB– Ash WSB (@Ashcryptoreal) April 21, 2023
Analyst Michaël van de Poppe added his analysis section, which also includes a shorter time frame:
“Technically, I think we’re going to have a classic pullback on Monday, and then we’re going to reverse. GDP and the Fed are coming out. The market is pricing in a 25 basis point possibility. Waiting for Bitcoin to finally get back to $27,800.”
Panicked Bitcoin Traders Accept Losses
It’s no secret that last week’s BTC price action spooked many inexperienced traders, and the data bears it out.
Younger tokens sent to exchanges saw a surge in losses last week, according to online analytics firm Glassnode.
Glassnode typically differentiates BTC supply by age, with “long-term holders” (LTH) used to describe wallets that have stored coins for 155 days or more. Below this threshold would be “short-term holders” (STH) – which typically correspond to a more speculative segment of Bitcoin’s investor base.
The data shows that since around April 16, STH tokens — tokens that were last moved within the past 155 days — have increasingly moved to exchanges at prices below their last traded price.
These actual STH losses indicate growing panic, and LTH has also recorded increased losses moving funds to exchanges.
A chart of the actual profit and loss of Bitcoin relative to long/short holders across exchanges. Source: Glassnode
Separate data from Coinglass shows weekly inflows to Binance at 21,000 BTC.
Chart of bitcoin balances on exchanges. Source: Coinglass
Research firm Santiment noticed some odd behavior when looking at the profit-to-loss ratio of trading volume in bitcoin and ethereum.
In recent days, there has been a discrepancy between the volume of losses and the volume of profits, despite relatively shallow price retracements for both assets.
“Losing trades have picked up as markets pull back as many traders FOMO over $30,000 on Bitcoin and $2,000 on Ethereum over the past week. As of Thursday, the frequency of traders trading coins at low prices was 3 times higher priced transactions.”
Annotated graph of Bitcoin and Ethereum transaction volume profit and loss data.Source: Santiment/Twitter
Analyst: “Smart Money Finished Accumulating BTC”
If the above phenomenon is an indication that speculative traders are exodus, then it may come at the right time – at least by historical standards.
Behind the scenes, the current Bitcoin bull market is unfolding like all previous ones, prominent Bitcoin analyst Mustache revealed in his latest market strength update.
Using Qualitative Quantitative Estimates (QQE) — a form of Relative Strength Index (RSI) — Mustache suggests that Bitcoin is currently at a pivotal point.
“Smart money bought the dip and is now waiting for the real uptick to start. The smart money has finished accumulating on BTC. I told you a few weeks ago that once QQE > 0 = accumulation is over. After that we always You’re going to see a big rebound.”
BTC/USD chart with QQE indicator.Source: Mustache/Twitter
Losses over the past week may have given bears a false sense of security, Mustache added.
“Definitely not the same. That’s buying the dip,” he concluded.
Crypto Sentiment Cools to ‘Neutral’
The potential dividend associated with the latest BTC price drop is tied to broader crypto market sentiment.
According to the Crypto Fear & Greed Index, sentiment among market participants is quickly returning to more reasonable levels.
Previously, the Fear and Greed Index was at its highest level since November 2021 and Bitcoin’s latest all-time high. Some warned at the time that this might not be sustainable and caused a rapid market correction as traders became complacent and continued to bet on the possibility of higher prices unchallenged.
With the retracement trend, the index completely abandoned its “greed” zone, entered the “neutral” zone and achieved 53/100 on April 24th.
Crypto Fear and Greed Index (screenshot). Source: alternative.me
This score is the lowest — or least “greedy” — since mid-March.
- Bitcoin caps bloody week as dollar liquidity falls on debt ceiling fears
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board pass
According to CoinDesk
