Yerevan (CoinChapter.com) — Bitcoin performance will be watched closely this week, with some analysts still looking for a sharp upside rebound towards $40,000 and beyond, after the flagship cryptocurrency closed the previous session 0.37 higher.
Nonetheless, BTC/USD was anything but stable. It underwent extremely wild price fluctuations last week, with exchange rates establishing a weekly low near $34,183 and a high near $39,489. It shows that traders do not know the next trend: upside, downside, or sideways. They await further clues from the market.
At the beginning of this week, the one comes from El Salvador, whose President Nayib Bukele has announced that he would propose a bill that would make Bitcoin a legal tender. As a result, it would be easier for his Grand Alliance to approve the bill owing to their majority in the parliament, paving the way for the Central American country to foray into cryptocurrencies.
The news has failed to garner higher bids from Bitcoin bulls so far. BTC/USD opened in positive territory on Monday, rising more than 1 percent as it continued to face strong resistance in the $36,000-37,000 range. So it appears the pair might face an uphill task as the weekly session focuses on key inflation report coming out of the US.
CPI
This week’s economic calendar will provide the latest report on consumer prices as economists study the impact of rising prices in crucial areas. In addition, the Consumer Price Index (CPI) would also serve as a clue to the Federal Reserve ahead of its policy meeting.
Economists anticipate the CPI to be near 4.7 percent in May compared to last year. In April, the inflation readings were 4.2%. However, the Fed rubbished the higher CPI after calling it transitionary in nature, stating that it resulted from a sudden spike in consumer demand after economies reopened.
The US central bank avoided any tapering talks. Instead, it decided to continue with its zero-rate interest rate and unlimited bond-buying policies that came into effect in March 2020 in the wake of the coronavirus pandemic.
Bitcoin bulls consider higher inflation as their cue to buy cryptocurrency.
Read more: Tesla’s Bitcoin Shock Offsets Supportive Inflation Data as Price Crashes to $46,000
Nevertheless, last month’s high CPI readings did little in driving investors into BTC/USD markets. Instead, gold, another anti-inflation asset that had performed poorly since August 2020, rebounded sharply on higher consumer price fears. Meanwhile, Bitcoin was correcting lower after rising more than 1,700 percent since March 2020, pointing to profit-taking sentiment among investors.
That pushes Bitcoin in a technical limbo, with short-term bias conflicts resulting from the cryptocurrency’s previous reaction to higher inflation reports. Then, of course, Elon Musk was the reason why BTC/USD dropped through its most bullish zones. But now, with the pair already trading more than 800 percent higher year on year, the downside pressure remains intact despite upside fundamentals.
And let’s blame technicals for that.
A bottleneck for Bitcoin bulls
Bitcoin consolidates now inside a bearish pennant range. That is because the cryptocurrency was trading lower before it trapped itself between a falling and a rising trendline. In most cases, such a structure leads the prices in the direction of their previous trends; hence, bearish.
Moving forward, BTC/USD expects a rebound towards the Pennant’s upper trendline, which also sits near its 20-day exponential moving average (200-day EMA; the green wave). If volume increases with a move uphill, it could present a decent long opportunity.
Read more: Bitcoin moves past Elon Musk’s breakup meme as BTC rebounds
Nonetheless, least risks remain skewed to the downside. A breakdown move below the Pennant’s lower trendline would have bears test $30,000 as the next target. Anything lower would increases the possibilities that BTC/USD tests $20,000.
Yashu Gola is a Mumbai-based finance journalist. He is profoundly active in the bitcoin space since 2014 – and has contributed to several cryptocurrency media outlets, including CoinChapter, NewsBTC, FxDailyReport, Bitcoinist, and CCN. Academically, Yashu holds a bachelor's in information technology, with majors in data structures and C++ programming language. He has also won the 'Atulya Award' for his efforts towards raising $100,000 for an India-based farming project.
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