The bitcoin price is consolidating below the important $23,000 level and is still up almost 50% from its 21 November lows, despite pulling back 1.5% in the past 24 hours to $22,600.
If the largest cryptocurrency by market cap can successfully challenge resistance between $23k and $25k, that will be key to sustaining its uptrend revival – it could also signal the end of the bear market.
If and when bitcoin breaks through the $23,000-$25,000 resistance region, there is, arguably, an open road ahead to $30,000.
But it is worth dwelling on the fact that $23k is such an area of strong resistance.
We can identify three discernible challenges to the $23k level that failed to hold between July and August last year (see chart annotations below).
The three failures decisively broke down when bitcoin plummeted $2,000 on 19 August.
Expectations of a rapid and successful assault on this important price level has proved a bridge too far for bulls, for now.
Bitcoin price is gathering fuel to relight its bullish fires
However, the longer that bitcoin hovers around its existing price levels, providing sellers with the opportunity to offload, the more confident we can be of future upside. Bitcoin is gathering fuel to relight the fires.
Zooming in to the 1-hour chart, note the contrast in angles of the incline and decline of the green ascending channel and the current red descending channel.
The first channel was formed in the wake of a near-parabolic movement that by definition becomes unsustainable at a certain point. Nothing goes up in a straight-line forever.
By contrast, the current gentle retracement has provided room for sellers, which eventually can exhaust itself in the short term, opening the way for the next leg up.
The exponential moving average (EMA) ribbon and the Ichimoku cloud on the 4-hour chart are both showing bitcoin trying to build support at the current price point, but there could be developing fragility here.
To read the EMA ribbon, readers should be aware that it spans MA20 (yellow) to MA55 (brown).
Crucially, perhaps, 1-hour candles and the chart shows the price has fallen below the EMA ribbon and is cutting into the Ichimoku cloud, which is demonstrably bearish for the current session.
An abundance of caution would suggest it is sensible to factor in, even for bulls, the possibility of a retrace to $21k before a fresh attempt to surmount $23k.
How the bitcoin price will be buffeted by US data on Inflation, GDP and consumer sentiment
Still, beyond the technical analysis, we can look to macro news to impact the price this week – and that is something of a recurrent theme of the past weeks and months.
However, there is a binary consideration to take into account that ultimately rests on judgements on the inflation and recession outlook that can be defined from US economic data.
Tomorrow, on Thursday 26th, US GDP growth rate and durable goods orders are on tap to provide a steer on whether the US economy is headed for a soft or hard landing.
On Friday the Fed’s preferred measure of inflation is released – the Personal Consumption Expenditure price index (PCE) – followed by the closely watched Michigan Consumer Sentiment reading.
The PCE data will be scrutinized by market participants in crypto and elsewhere to see if it confirms what was evident in last week’s retail sales data, namely that consumers are deferring big spending decision and reducing spending across the board.
Meanwhile, the former, the PCE data, will be assessed to see whether it confirms previous indication from the CPI data that US inflation is past its peak.
What are the implications for bitcoin of a looming recession in the US?
All of the above data has a bearing on whether the Fed will slow interest hikes.
Any signs that the economy is cooling will be music to the ears of those holding risk assets such as crypto. But there’s another side to that, which could be bad news all round, if the data signals an increased likelihood of a deep recession.
If strong companies such as Amazon and Microsoft are laying-off thousands of workers, it doesn’t bode well for the rest of the economy. Tech firms could be said to have made the mistake of over-hiring during the pandemic and could therefore be excused as a special case, but that’s looking a bit thin.
The data on whether the US is headed into a recession sooner rather than later continues to be mixed.
On the one hand, manufacturing and house sales are contracting, but on the other factory employment and construction activity remains robust, although that overall incongruence might be explained by some lagging effects.
Nevertheless, a weakening economy – but not too weak – is likely to invigorate bulls in the crypto market.
A weakening economy implies the Fed will be more amenable to pivoting away from aggressive interest rate hikes. In fact it could provide the impetus to take bitcoin through the $23k barrier and above the critical $25k level previously identified.
Another important part of the picture is the partial correlation decoupling of bitcoin from the S&P 500. Bitcoin has been rallying, to some extent all by itself, as you can see in the chart below.
Note, we use the SPDR S&P 500 ETF (SPY) as a proxy for S&P 500 because it is both the cheapest and most liquid way to gain exposure to the index.
Compare it, also, against gold (XAUUSD), the dollar index (DXY), which measures the value of the dollar against a basket of the most widely traded currencies.
If bitcoin is a leading indicator, then a rising S&P 500 and Nasdaq could be moving significantly higher too’
Such an outcome would be grist to the mill for a strongly bullish set-up developing in 2023, providing medium-term encouragement for price-supportive action ahead for bitcoin and the rest of the crypto complex.
And then there’s the bitcoin halving event coming to bring bulls joy
Finally, in terms of the longer term forecast and how that might impact present day accumulation strategies by institutions and retail, we should bear in mind the next bitcoin halving event takes place in March 2024.
That’s a little over a year away and is a fundamental that has never failed as a positive catalyst for the BTC.
Before you buy bitcoin consider some other options for your crypto portfolio
Some level of exposure to bitcoin should probably be in all crypto portfolios.
But if the current bitcoin entry point is not to your liking, then it might be worth looking at some smaller cap high-potential crypto projects instead.
Check out the top 15 cryptocurrencies for 2023, as analyzed by the CryptoNews Industry Talk team.
The list is updated weekly with new altcoins and ICO projects.
Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.