cryptocoin.com As we reported, as Bitcoin (BTC) is trying to overcome the tough barrier of $ 27 thousand, 4 worrying charts have been announced for Bitcoin bulls! So, what will be the price of Bitcoin (BTC)? Here are the details…
Experts explained: These 4 charts are critical for Bitcoin price!
As you know, Bitcoin rose by nearly 60 percent to $27,000 in 2023, with expectations that the Federal Reserve will pause quantitative tightening amid the US Banking crisis. Still, BTC price failed to stay stable above the $30,000 level. The exhaustion of buying at this key psychological level resulted in a price correction towards the $25,000 level last week. Interestingly, with this decline, Bitcoin’s correlation with many traditional financial metrics has strengthened. So what’s next for Bitcoin (BTC) price?
US dollar index doubled down
The US dollar index (DXY), which measures the dollar’s strength against a group of major foreign currencies, rose 1.4% to 102.70 in the week ended May 14. This rise marked the dollar’s best week since September 2022. Interestingly, the dollar’s rally has outstripped a potential double bottom pattern confirmed by two lows near a similar horizontal price level around 100.75. The double bottom pattern is a bullish reversal and indicates that DXY could rally towards 105.85 in the next few months.
The weekly relative strength index (RSI), which recovered after DXY hit 35, just five points above the oversold threshold, hints at continued bullishness for Bitcoin price. The main reason for this is that the weekly negative correlation between Bitcoin and DXY is getting stronger and the coefficient is around -50 as of May 14. Earlier in the week, the latest US consumer price index (CPI) report showed headline inflation fell to 4.9% in April, compared to 5% the previous month. However, core inflation rose 5.5%, showing that underlying price pressures remained sticky, cooling the Fed’s rate cut expectations for now. Bloomberg’s John Authers said: “The probability of a ‘stopping’ in the next month’s rate hike, which was seen as 84% before the figures were released, has become almost certain in the futures and swap markets.” conveyed his words.
The Fed’s recession may lead to stabilization in the bond market. According to Erin Browne and Emmanuel Sharef of Pimco, history shows that stable interest rates are good for US Treasury bonds but bad for stocks:
If the Fed stagnates at the top rate for at least six months and the US enters a recession, history shows that the 12-month yields following the last rate hike could be flat for 10-year US Treasuries, while the S&P 500 could sell out sharply.
So, while the reduction in risk appetite will be enormous for the dollar, it will increase the risk that Bitcoin will not be able to recover $30,000 in the short term.
Gold price close to key turning point
In the midst of the US banking crisis, the price of gold rose nearly 15 percent to over $2,000 an ounce. The positive correlation with Bitcoin has also strengthened with a weekly coefficient of 0.82 as of May 14. However, the rally of gold brought its price to the notorious horizontal resistance near $2,075. In March 2022, this level was instrumental in triggering a sharp decline phase that reduced the value of gold by up to 22%.
Similarly, testing of the level as resistance in August 2020 preceded an 18% price drop. If the scenario repeats in 2023, the price of gold could decline towards its 50-week exponential moving average (50-week EMA; red wave) around $1,850. Gold’s weekly RSI is also hovering around the overbought level of 70, indicating a similar downside scenario. As a result of the precious metal’s positive correlation with Bitcoin, Bitcoin could see a similar correction in Q2.
US M2 money supply decreasing
M2 measures cash in circulation and dollars in bank and money market accounts. The M2 figure peaked at $21.84 trillion in January 2022, up more than 40 percent due to the Fed’s quantitative expansion during the Covid-19 pandemic. It has since slumped to $20.81 trillion, down more than 4 percent from its peak in May 2023.
The more than 2 percent drop in M2 supply, which has occurred four times to date, is bad news for the stock market, as it preceded three depressions and one panic. In other words, the significant drop in M2 could herald new lows for Bitcoin (BTC), which often moves with US stock indices. Currently, the weekly correlation coefficient between Bitcoin and the Nasdaq-100 index is 0.92.
Bitcoin price “Rising Wedge” chart could pull the price to $15,000
Bitcoin seems to be heading towards the $15,000-20,000 price range based on the potential breakout point, which appears to be an ascending wedge formation.
For technical analysts, a rising wedge is a bearish reversal pattern that occurs when price rises within a range defined by two narrowing, ascending trendlines. According to experts, it is resolved by dropping by the maximum wedge height after the price drops below the lower trendline. If this BTC price pattern is confirmed, especially considering the macro indicators mentioned above, the Bitcoin price will drop to as low as $15,000 in 2023, dropping by about 45 percent from current price levels.
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