Bitcoin Crashes Below 8-Month Support Line, More Pain Incoming?
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For the first time since early January, Bitcoin is changing hands below a critical support band and the 20-week moving average, evident in the weekly chart.
An analyst on X, formerly Twitter, pointed out this formation and has since raised questions about the coin’s prospects in the days and weeks ahead. Bitcoin is trading at around $26,000, down 18% from July 2023 peak. The situation remains tense for coin holders as the price pressures continue to mount.
Bitcoin Breaks Below Critical Support Levels
Looking at price action in the weekly chart, sellers are in control and actively aiming to erase gains posted between June and July 2023. At this pace, it won’t not only mean more pressure on holders but more liquidations for long positions in derivatives exchanges, impacting sentiment and thus lowering overall liquidity across the crypto scene.
A deeper analysis of the weekly chart also reveals a noteworthy decrease in trading volumes as last year’s dominant bear price formation came to fruition. This decline in trading volume is particularly concerning and prints after the collapse of several banks in the United States, including the significant Silicon Valley Bank (SVB), in March.
The fallout from these bank collapses triggered the depegging of the USDC, a move that also lifted top coins, including Bitcoin and Ethereum.
The lack of bullish momentum to ignite demand and reverse the losses of 2022, even after the push towards $32,000 in July 2023, could indicate that the market is fragile and bulls are unsure. At the pace of this drawdown, there are looming risks that prices could continue trickling lower in H2 2023, translating to more pain for HODLers.
Blame The Fed and Evergrande?
Analysts attribute this sell-off to a range of fundamental factors. The anticipation of the United States Federal Reserve (Fed) raising interest rates in the coming months creates uncertainty, as it could make borrowing more expensive.
The Fed could raise interest rates in Q3 and 4 in response to the persistent inflation, which remains high above the benchmark 2% level. With high funding rates, there will be an inevitable impact on the crypto market, altering the risk-reward balance for investors.
Beyond the macroeconomic influences in the United States, the recent Chapter 11 bankruptcy filing by China’s Evergrande Group indirectly affected BTC and crypto. The unfolding events and sentiment shifts, especially within China’s fragile real estate sector, will likely reverberate through the crypto landscape, a net negative for BTC.
Feature image from Canva, chart from TradingView
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