There is no action in the cryptocurrency market as Bitcoin is still trading between $29,000 and $30,000. The first cryptocurrency by market cap has been range bound since the collapse of the Terra ecosystem and took a hit in an already weak market.
The “black swan” event preceded one of the worst periods in space as Bitcoin and Ethereum posted record losses in a row. At the time of writing, BTC is trading at $29,500 with a loss of 2% in the last 24 hours.
According to a pseudonymous trader, Bitcoin could be ready to retest the lows at $29,000 before resuming its upward momentum. The trader expects the price of BTC to drop below this level and then bounce back to $35,000.
This would put Bitcoin near the bottom of its current range. Therefore, a move to the upside and some relief seems to make sense, if BTC is to continue its range-bound trend.
In this sense, the pseudonym recommended the trader to “play the trend” and re-examine whether BTC is above those levels. Merchant He said Via Twitter:
Before you get frustrated about trading, just remember that this very small range of chop is what was very difficult for everyone to figure out. Once you determine the direction from here, it becomes easier.
a Report QCP Research agrees that $28,700 is a major support area, in case of further decline, as it represents the current 61.8% Fibonacci retracement level of BTC. The report says that these Fibonacci levels have been “pivotal” for Bitcoin throughout its history.
Especially during 2020, when the COVID-19 pandemic sent BTC to test the 61.8% Fibonacci level at around $3800. This level was maintained during one of the worst bitcoin withdrawals. QCP Research said:
For BTC and ETH, the current drawdown is now identical to the 2020 Covid dip. It is possible that we will see a short-term bounce from these oversold levels.
Why Bad News is Good for Bitcoin and Risk Assets
In addition, the report claims that Bitcoin, and other risky assets, appear to be inversely correlated with the media. Whenever “good news” about inflation, unemployment, and other metrics in the US appears to the public, these assets appear to be headed lower.
The opposite happened from 2020 to 2021 as bad news about COVID-19 translated into an economic stimulus. Now, the US Federal Reserve (FED) is determined to stop inflation and begin removing liquidity from global markets while launching its Quantitative Tightening (QT) program.
This will force the corporation to empty its balance sheet in global markets. As a result, bitcoin and stocks will continue to suffer in the coming months, QCP Research believes. The report claimed:
This drain on liquidity will only be exacerbated by the upcoming QT balance sheet liquidation as well, starting June 1. We expect these factors to affect cryptocurrency prices.
The current narrative in the mainstream media runs on the back of inflation. If it changes to words like “recession” or “recession,” the US Federal Reserve may have to slow down in its tightening giving some relief to Bitcoin and stocks, the report claims.
In other words, if the news goes from bad to worse, Bitcoin may change its direction to the upside. In the meantime, it looks likely to remain within a certain range or with shorter rallies.