Bitcoin (BTC) is beginning the week in recovery mode following a highly volatile weekend that resulted in significant losses. The cryptocurrency is struggling to regain its previous all-time highs after facing sustained selling pressure. This week is crucial for both the crypto and risk asset markets as they await cues from the United States Federal Reserve. The battle against inflation continues, and recent data suggests that inflationary forces are still strong. BTC/USD is currently in a critical zone that needs to be reclaimed for price discovery to continue. With the upcoming block subsidy halving just one month away, Bitcoin could be experiencing a classic pre-halving retracement. In this weekly rundown, we will explore these issues and other factors that could impact BTC price action in the coming days and beyond.
BTC price is currently below key resistance levels after experiencing a brutal weekend that pushed it to its lowest levels since March 6. However, it has since recovered, reaching close to $69,000 before encountering fresh losses. At the time of writing, it is trading around $68,000. Traders are closely watching the 21-period exponential moving average (EMA) on the four-hour chart and the relative strength index (RSI) readings on four-hour timeframes, which need to turn positive for a bullish trend to resume.
The selling pressure over the weekend was unusually intense, with theories suggesting that a single hedge fund’s position unwinding and smaller BTC holders offloading their holdings contributed to the downturn. Despite this setback, Bitcoin managed to close the week just below $68,400, marking its second-highest weekly close ever.
Market data also indicates a significant flush in liquidity and a reset in open interest and funding rates. Long liquidations totaled over $300 million, and there is now limited liquidity for perpetual swaps on major exchanges. The funding rates, although still positive, have decreased from their recent peaks. Some traders are expressing bearish sentiment, but analysts believe that positive funding rates will continue with occasional resets.
Bitcoin miners are approaching the final month of 6.25 BTC block subsidies before the halving in April. The impact of this event on BTC price behavior is still uncertain, but historical data suggests that a new all-time high may not occur immediately after the halving. Previous halvings have resulted in a “pre-halving retrace” where Bitcoin experiences corrections of up to 40%. Despite consistent buying by U.S. spot Bitcoin exchange-traded funds (ETFs), the standard cycle phenomena are still playing out.
The focus this week will be on the Federal Reserve’s decision on interest rates and Chair Jerome Powell’s commentary. The market expects few surprises, as persistent inflation has eliminated the possibility of a rate cut. Powell’s language and guidance will be closely monitored for cues on future policy moves.
While sentiment remains in the “extreme greed” zone, some long-term holders (LTHs) have been taking profits and distributing their BTC holdings. Over the past month, LTHs have sold nearly 600,000 BTC, amounting to around $40 billion. This selling activity has been attributed to factors such as the Grayscale Bitcoin Trust and increased selling by Bitcoin miners.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment decisions.