Bitcoin Week Ahead Ep01: Bearish Wedge, FOMC Meeting, Exchange Flow in Focus

Bitcoin Week Ahead Ep01: Bearish Wedge, FOMC Meeting, Exchange Flow in Focus
Bitcoin Week Ahead Ep01: Bearish Wedge, FOMC Meeting, Exchange Flow in Focus

Yerevan (CoinChapter.com) — It is not hard to spot signs of extreme speculations in the Bitcoin market, especially after a depressive close to the week ending April 25.

In retrospect, the flagship cryptocurrency finished the said session down 12.71 percent at $47,044.01 (data from Coinbase). At first, it appeared like a natural correction that was poised to arrive after a supersonic price rally so far into 2021. Bitcoin had settled a new record high of $64,899 on April 14, and the profits were for taking.

The Crash That Was

Some negative catalysts accelerated the sell-off, including a rumor that the Joe Biden administration would impose heavy taxes on people’s cryptocurrency profits. More bearish tailwinds came from China, as miners there had to halt operations due to power outages.

The news ended up wiping about $200 billion off all the cryptocurrency market combined, affecting Bitcoin. In the derivatives market, the cryptocurrency’s decline liquidated $4.9 billion worth of contracts. As a result, the price briefly plummeted to $51,000 before recovering back to above $55,000.

Read More: Bitcoin Weekly Analysis: Its Do or Die After Weekend Bloodbath

The bad fundamentals also validated classic bearish technical setups. Bitcoin showed signs of breaking out of Rising Wedge, a pattern that traditional chartists consider overly bearish. If traders are indeed taking their cues from the Wedge, the Bitcoin price will likely fall to at least $42,000 in the coming sessions.

Bitcoin breakdown continues below Wedge support
Bitcoin breakdown continues below Wedge support. Source: BTCUSD on TradingView.com

The cryptocurrency on Monday jumped after testing its 100-day simple moving average (100-DMA; the purple wave in the chart above). Meanwhile, its short-term bearish bias remained intact due to a death cross formation between the 20-day exponential moving average and the 50-day simple moving average.

Read More: Bitcoin Price Outlook: Deadly Death Cross Meets $41,000-Price Target

Every week throws up cases that challenge perceptions of rational investing decisions. Traders pump Dogecoin, literally a joke cryptocurrency, by more than 5,000 percent year-to-date (YTD) without giving any concrete reasons about their investment adventures.

If they end up losing money by buying the top in what appears to be a clear DOGE bubble, the downside pressure on more genuine assets like Bitcoin and Ethereum increases, for traders tend to sell them to offset their losses elsewhere. CoinChapter.com readers should assume those risks while placing upside bets.

Bitcoin Meets FOMC Again

But then, macroeconomic fundamentals look supportive of the overall Bitcoin upside bias. This week, investors would focus on the Federal Open Market Committee’s April meeting on Tuesday and Wednesday that would soon follow up with a press conference from the Federal Reserve Chairman Jerome Powell around 1430 ET.

The US central bank has already signaled its intention to hold interest rates near zero until 2023.

Mr. Powell has also noted that his office’s decision to hike rates would succeed adjustments in their crisis-era asset purchase program. The Fed has been buying $120 billion worth of government debts and mortgage-backed securities every month since March 2020.

Read More: Bitcoin (BTC/USD) Wobbles Around $50,000 Ahead of Powell’s Speech

Bitcoin has benefited majorly from the central bank’s quantitative easing policies, primarily because it made other safe-haven alternatives, including bonds and the US dollar, less appealing for yield-hungry investors.

The cryptocurrency does not produce any yields but remains an attractive asset for investors who consider its scarcity attractive against an unlimited dollar supply and the inflation it causes.

“[After] the April FOMC meeting, we expect Chair Powell and the FOMC to give a more positive view of the economy but reiterate that the economy needs to make further progress before signaling any policy change and risks remain from the virus,”

Michelle Meyer, Bank of America’s chief economist, wrote in a note.

Exchange Flows

The event coincides with a notable reversal in exchange flows. Willy Woo, a prominent on-chain analyst, noted that the average size of Bitcoin withdrawals from trading platforms now stands higher than deposits. On the whole, it indicates traders’ intention to “HODL” their tokens than selling them.

Bitcoin net transfer volume from/to exchanges
Bitcoin net transfer volume. Source: Glassnode

“That’s to say we have larger buyers and smaller sellers; another sign of recovery,” he wrote in a note to clients.

Image by ❤️A life without animals is not worth living❤️ from Pixabay

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