Bitcoin (BTC) suffered a sharp decline on Wednesday, with market analysts attributing the drop to a significant sell-off order on the world’s largest cryptocurrency exchange, Binance. In addition, the hotter-than-expected inflation data in the UK also played a role in affecting BTC’s price action. As of the end of trading on Wednesday, BTC/USD was hovering just above the $29,000 level, representing a loss of roughly 4.5% in a single day, and marking its worst performance since the 9th of March.
Despite this, the liquidation of leveraged long positions in Bitcoin futures has remained relatively low, at just over $40 million, according to coinglass. This suggests that the latest move lower has not yet resulted in a long squeeze. Bitcoin is currently managing to stay above the key psychological level of $29,000, with its 21-Day Moving Average just above it at $29,043.
Support for the cryptocurrency is coming in the form of the late March/early April highs in the $28,780-$29,380 area. This is keeping a floor under the price for now, but a break below this support could see a quick drop to the $28,000 level. If BTC falls below this, it could potentially drop towards resistance-turned-support in the $26,500 area, where the 50DMA resides. The next major support zone is in the $25,200-$25,400 range. Should Bitcoin drop back to the mid-$20,000s, it could present an enormous opportunity for bulls to add to long positions, or for those who missed out on the March rebound from sub-$20,000 lows to enter the market.
Despite the ongoing risk of short-term volatility and swift 20% corrections, Bitcoin has shown strong signs of being in the early stages of a new bull market. Widely followed on-chain indicators support this view, and analysis of Bitcoin’s longer-term market cycles suggests that last year’s lows in the $15,000s were the bottom of the last bear market.
The macro backdrop also looks set to become more favorable for Bitcoin in 2023. While there may be one or two more interest rate hikes from the US Federal Reserve, the risks seem to be tilted towards a rate cutting cycle beginning in the later half of the year, as the Fed deals with a likely oncoming recession.