Bitcoin (BTC) is keeping everyone on their toes when it comes to price trajectory – where will it go next?
BTC price down 10% after bad week
After a week in which BTC/USD fell by 10%, sentiment is getting a reset and traders are eyeing key support levels closer to $25,000.
At the same time, consensus is far from unanimous over market health – some believe that the next phase of upside is around the corner.
As macro markets gear up for a new period of crucial data and moves from the United States Federal Reserve, volatility catalysts are waiting in the wings, with Bitcoin potentially not staying calm for long.
Cointelegraph takes a look at the upcoming scenarios that could cause BTC/USD to quit its short-term sideways trading pattern.
Will the Fed call the market’s bluff?
It may be all quiet so far when it comes to macroeconomic triggers this week, but that is about to change.
Beginning April 27, new data will emerge from the U.S. which could deliver a burst of volatility for currently lackluster risk assets.
U.S. GDP and jobless claims will precede the March print of the Personal Consumption Expenditures (PCE) Index, the latter keenly eyed by the Fed for cues on inflation.
This month’s timing is important – a week later, the Fed will decide on how much, if at all, to raise benchmark interest rates. While the market already believes it knows the answer, this allows any surprises to have an even more pronounced impact on sentiment and price action.
According to CME Group’s FedWatch Tool, as of April 25, there is an 87% chance that the Fed raises rates by 0.25% in early May.
Fed target rate probabilities chart. Source: CME Group
Cold feet emerge over U.S. stocks
Bitcoin remains correlated with U.S. equities into the end of the month, and concerns beyond crypto are focusing on indices’ inability to print new highs.
For trading firm Mosaic Asset, caution is warranted for several reasons going forward.
“First, the rally since mid-March is leading to a sharp increase in bullish sentiment, signaling too much greed among investors. There’s also a big negative breadth divergence across multiple time frames in the stock market’s rally since mid-March,” it warned in the latest edition of its regular newsletter, “The Market Mosaic,” released on April 23.
An accompanying chart showed declining bullishness across S&P 500 stocks, marking a potential change of environment compared to Q1.
“Just take a look at the percent of stocks trading above their 50-day moving average (MA),” it continued.
“When the S&P was trading at a similar level back in early February, nearly 81% of stocks were in solid uptrends as shown with the arrows. But look at where things stand now with the circles. While the S&P 500 finds itself right back to similar levels, only 41% of stocks are in uptrends.”
S&P 500 with % stocks above 50-day moving average. Source: Mosaic Asset
Bitcoin tipped to reverse on liquidity sweep
An optimistic take among some Bitcoin market participants focuses on sweeping range lows to continue the bull run.
Related: ‘Smart money’ eyes BTC bull run: 5 things to know in Bitcoin this week
Adherents place emphasis on an area in the mid-$26,000 zone, with the potential to extend past Bitcoin’s 200-week moving average at around $25,850.
“Bitcoin is still acting sideways here, which means that it might be sweeping the low one more time and then reverse up,” Michaël van de Poppe, founder and CEO of trading firm Eight, told Twitter followers on April 25.
“I’m still expecting to take longs in the next few days.”
An accompanying chart confirmed $26,600 as the downside target for the liquidity sweep.
BTC/USD annotated chart. Source: Michaël van de Poppe/ Twitter
Popular trader Jelle is meanwhile one voice believing that the worst of the correction is over, adding to spot in recent days.
“The higher timeframe direction is clear, this is just one of the many corrections on the way up. Buy the blood, sell the euphoria. Don’t get it twisted,” part of Twitter comments read.
Jelle likewise sees similarities to BTC price action in February, but is banking on a positive breakout thanks to a bullish divergence in Relative Strength Index (RSI).
Zooming in – we have #Bitcoin sitting at a big support cluster, while RSI looks to be building a divergence.
Enough for me to get long.
Invalidation on a breakdown, adding if the divergence locks in. pic.twitter.com/F1ATLOdsmO
– Jelle (@CryptoJelleNL) April 24, 2023
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.