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Bitcoin underwent a bearish swing on February 21 and 24 back-to-back, correcting to $23,100 at the time of writing. The past 24 hours have been particularly grim for buyers as the token lost over $1,000, with trading volume declining by 11%.
This bearish impression has been seen across the market as Bitcoin turns its support of $23,100 into resistance. As of the evening of the 24th, Bitcoin was well above its resistance of $23,739, which is attributed to buyers participating in the market helping to prevent further losses.
The Bitcoin price was predicted to experience a downward trend if the price levels did not rise from the aforementioned resistance level. Had it shown bullish momentum, Bitcoin could possibly have challenged $24,267 and headed towards $25,000.
Price analysis of the token suggests that buyers will need to break this level for the token to gain bullish momentum. Once the token price crosses its high on the 24th, investors can expect a bounce that could wipe out this week’s losses.
Inflation anxiety drives Bitcoin to a weekly low
Market participants increasingly expect the US Federal Reserve to raise its benchmark fed funds rate by 50 basis points next month after the PCE price index showed a disinflationary trend that leveled off in January .
The January price index rose 5.4% compared to last year, well above the forecasts of economists who predicted the token would mark a 5% gain. Also on a monthly basis, the PCE price index beat expectations, gaining 0.6% in January, compared to predictions for 0.5%.
The base rate for the metric, which excludes energy and food prices, increased to 4.7% in January from 4.6% in December. Estimates for these figures projected an increase of 4.3%. This report triggered a price crash among risky assets like cryptocurrencies, where bitcoin fell around $200 initially and consequently fell to $23,100. Currently, the token is challenging $23,000, which would be the lowest level for Bitcoin this week.
Crypto-related stocks, including MicroStrategy and Coinbase, are also down 5-8%. While Nasdaq 100 futures were down 1.72% on Saturday, and S&P 500 futures were down 1.1%, as of this writing.
The Fed has been looking at personal consumer spending as the leading indicator to gauge inflation. The odds of inflation rising by 50 basis points are rising compared to an estimate of 25 basis points in January, leaving traders completely divided on how cryptocurrencies will perform in the near term.
Margin Longs Defend $24k as Option Traders Remain Confident of Downside Risks
Margin markets help to understand the position of professional traders in the market, as investors can take advantage of their cryptocurrency positions by borrowing additional cryptocurrencies. Investors can, for example, increase their exposure to Bitcoin by borrowing cryptocurrencies and going long.
Bitcoin’s Margin Lending Index rose between February 21 and 23, indicating that forward traders were taking advantage of long positions when the price dipped below $24,000. Which helped sustain the price of the token for a while, although skepticism around rising inflation rates caused the price to drop soon after.
Options markets, on the other hand, can help gauge how risk-averse investors are, while the 25% delta bias indicates overcharging for upside or downside protection by market makers. The indicator turns positive with an increase in fear. So a 10% rise will suggest a Bitcoin drop, while a 10% drop will indicate excitement.
The chart above suggests executive demand for long spreads, while option traders’ risk assessments remain neutral. Bitcoin derivatives are holding up quite well considering the pressure from regulators, indicating a positive outlook for the token in the near term.
Will Bitcoin Rally After the February 15 Surge Rebalance?
The bitcoin price is currently at $23,148, with a transaction volume of $24.8 billion in the last 24 hours. The price has decreased by 2.77% in the last 24 hours and the market capitalization of the token remains at $446 billion.
Bitcoin broke its support at $23,600 but successfully rallied from the $23,100 level with $23,375 as its next resistance. Bitcoin will have to cross this resistance and successfully break $24,100 if it plans to reach $24,500 and consequently head for $25,000.
The RSI and MACD indicators are still in the sell zone for now, and the $23,600 and $23,350 levels will play an important role in deciding the short-term trajectory of the token. Once prices break above these levels, bitcoin will present a buying opportunity for investors, possibly experiencing a brief rally.
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