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25.05.2023 10:40 AM
Bitcoin updates local low amid Fed statements
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Over the past one and a half weeks, Bitcoin has been trading within the range of $26.6k to $27.5k, where large order blocks were concentrated. Due to the decrease in trading activity in the crypto market and the improved situation in the stock market, the price of BTC failed to break out of this range.

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At the same time, bearish sentiments prevailed in the market, but they were not sufficient to break out of the volatility corridor. The period of calm was replaced by mild panic in the market after the speeches of the Federal Reserve System members and the announcement of the agency's future plans.

Fed intensifies bearish trend in the BTC market

The statements made by Fed officials can hardly be called positive. Officials noted that they see "uncertainty" in the future of the key interest rate and expressed the general opinion that the indicator may be raised again in the future. Members of the agency also stated that it would be wrong to give investors hope for a rate cut in 2023.

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These Fed statements significantly worsened market expectations since, prior to the public speeches, over 75% of investors were confident in a rate cut already in the summer or fall of 2023. According to FT, market players significantly revised their rate forecasts for 2023 after the officials' statements.

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Adding fuel to the fire, the CEO of Goldman Sachs stated that inflation in the U.S. would be more sustained than forecasted. The banker is also confident that the Federal Reserve will have to raise the key interest rate even higher to reach the 2% baseline. Parallel to these statements, there is a significant reduction in global liquidity.

Bitcoin performs a dangerous bearish reversal

The discouraging statements by the Federal Reserve sparked a surge in volatility in the crypto market, which culminated in a long-awaited breakthrough of the $26.6k level. Bitcoin finally made a bearish breakthrough of the key bullish position and settled below it. This gives the bears the opportunity to push the price down to a low of $25k.

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By the end of yesterday's trading day, the bulls failed to regain the initiative from the bears and push the price back above $27k. Furthermore, the Fed statements worsened the situation, and BTC formed a "bearish engulfing" pattern. The new trading day for Bitcoin also started with a decline, and at one point, the price retested the $25.5k level.

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Buyers managed to defend the threshold and push the price back above $26k. However, there are strong indications that the decline will continue. Technical metrics on the 1D timeframe indicate a sustained downward trend. The stochastic oscillator shows a bearish crossover, and the RSI is moving below the 40 mark.

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Considering the bearish sentiments in the crypto market and the global economy, as well as the minimal horizontal volumes in the $25k–$26.5k range, further downward movement of the cryptocurrency should be expected. The new targets for sellers are now considered to be in the $24.6k–$25k range. If this range is breached, the structure of the BTC upward trend will collapse, opening the way to $23k.

Conclusion

Bitcoin once again demonstrated a high level of dependence on the actions of the Fed. The situation is further complicated by the rapid decline in BTC's market capitalization, which will lead to an increase in bearish sentiments. As we know, the market always goes against the crowd, so it is quite possible that a strong upward impulse awaits us near $25k, especially considering the fact that "whales" have resumed accumulating stablecoins.

Artem Petrenko,
Analytical expert of InstaForex
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