Market Sentiment Could Sour Again, Sending Bitcoin under $20k

Bitcoin has put its strong foot forward, entering the weekend on a high note, and bulls are targeting $25K. At press time, BTC is trading at $23,168 on CoinGecko. This is a -2.8% drop over the last 7 days and a -43.2% drop since August 2021. BTC’s price started to trend lower following a series of bad news against leading cryptocurrency companies and the U.S. Federal Reserve (FED) decision to shift to the monetary policy.

Bitcoin price has bounced back from the $20,000 area to make two higher highs and lows. The pattern may indicate that the market is finally starting to witness an uptrend. The structure is also increasing the positive sentiment across the futures market, but the market sentiment could sour again, sending BTC under $20K.

The leading crypto by market cap continues to hold above the $23,000 price level. This is despite recent hacks that malicious threat actors loot millions of dollars from two cryptocurrency platforms. According to Marcus Sotiriou, despite the exploits, BTC continues to show strength above $23k.

An excerpt from the analyst’s print at GlobalBlock digital asset broker reads, “Despite these hacks, the illicit activity relative to fiat currencies remains low.” Sotiriou’s opined South African professor Steven Sidley supports the scenario. Steven is on record remarking that illicit transactions involving fiat currencies were 50x that experienced in the crypto market.

BTC funding rates

For the past few weeks, the funding rates have been printing positive values, leading to the dominance of positive sentiment within the futures market.

However, despite the bullish market structure and the current short-term price increase, the macroeconomic and geopolitical image remain fixed in an intense state. There is spreading anxiety about another war in the east, causing more wave-like effects.

In time, the ongoing positive funding rates may prove to be a curse, as was the case in April this year. They could set the market on a path to a long squeeze followed by a subsequent liquidation cascade and eventually another significant decline, alongside a bearish trend below the $20K mark. For this reason, it would not be wise to completely ignore the possibility of a bearish outcome, even as higher funding rates may lead to increased volatility over the near term.

Technical Analysis

Bitcoin’s prolonged rally south has paused in the last few weeks, with Bitcoin price being supported several times at the $17K-$20K range of the 2017 ATH. Bitcoin has been struggling with the 24K resistance level over the last few weeks, following a break above the 50-day moving average (M.A.) for the first time since April.

If the people’s crypto finally breaches the $24K level upside, the 100-day M.A. would be the first obstacle before the $30K supply zone. The other possible outcome is that should the price fail to break above the $24K area, and the 50-day M.A. would now serve as a support.

In the coming week, traders will likely be watching the $24K mark because the price action within this zone would determine the expected short-term market trend.

The four-hour chart

On the 4-hour timeframe, the Bitcoin price remains trapped within the bearish flag pattern, following a failed attempt to test the higher trendline for the third time. This bearish flag continues the bearish pattern, and should the price fall to break above it. Then, the market could be due for another drop towards the $17,000 level and beyond.

BTC/USD 4-hour chart

Currently, the crypto market is witnessing a struggling price action, making it unclear to identify a clear direction. The RSI indicator oscillates around the 50% zone, reiterating the uncertainty in price action. As such, the coming few days are key even as the market hopes for the next big move that could shape amidst these prices.

BTC/USD Technical Indicators chart

The BTC/USD pair now hovers around the $23,200 level posting higher lows on the trading charts. The main concern bothering the day traders is the absence of volume, potentially threatening the ongoing Bitcoin price uptick. On their side, traders now strive to identify more conviction in this rally, sitting on the sidelines alongside institutional buyers who are also currently not taking an active part.

Market sentiment could sour again.

The markets do not show any aggressive bids at the moment that may spur confidence among investors. The rebound has started to move slowly, and the BTC/USD pair is ending consolidation absent any big bang. The ascent from $18,900 is helping bullish sentiment, and the swing high at $24,000 has been a tough nut to crack. The corrective pullback is limiting the BTC/USD’s higher side potential.

Conversely, equities are trading relatively higher, riding against the Fed decision and higher earnings. A reversal from $24,500 levels is indicative that the buying pressure is not very strong, and buyers, too, are not on a certain footing.

The consolidation is heading upwards, with the BTC/USD pair gradually moving towards higher levels. The pair will initially impulse at the 50-day EMA where any decisive purchase will be more evident in the volume data.

The Bitcoin price chart reveals that the pullback is also losing momentum. The daily charts may be compelled to settle down around the $23K zone, allowing BTC to rally north healthily. The resistance zone around $23,400 is another factor keeping the Bitcoin price down. For the price action to go higher past the $25K psychological level, BTC/USD should decisively close above the $23,400 level.

The BTC/USD 4-hour chart (above) displays a scenario with mixed signals, with a bearish flag pattern near the higher trendline. There is potential that the pair may be rejected for yet another time as the continuation pattern may end with the pair going further south in price. Should the price break lower, the BTC/USD pair may swiftly approach the $21,750 level.

Technical indicators show a positive bias 

The prevailing price action may be termed “choppy” with a higher bias. So far, the weekend does not show any likelihood of altering the pattern. This is because the volume decreases with no clear directional indication emerging from the ongoing trend. The RSI (above) is also in a stagnant trend near the 50% level, complicating the matter further. The uncertainty witnessed in the price movement on the MACD indicator (above) is also another piece of evidence. This can be seen in the convergence of lines.

Most of the green candlesticks on the charts are enablers of the positive price action. The 20-day exponential moving average and the 50-day exponential moving average do not permit massive price movement. This renders the bullish sentiment mute.

What happens if Bitcoin breaks below $20K?

The Fed’s increased interest rates have prepared the market for more losses. This happens despite BTC operating within a critical support zone. If Bitcoin breaks below $20K, this would mean potential doom for the cryptocurrency market.

Breaking below $20K will trigger massive selling pressure across the spot markets. This is because traders and investors will be looking to hedge themselves. We can also expect huge over-the-counter traders, which will not be able to hedge properly.