The post Bitcoin (BTC) Price Surge May Consolidate at $26K for Some Days! Here’s Why appeared first on Coinpedia Fintech News
Bitcoin (BTC) surged to its 2023 peak at $26,550 on March 14 after the United States inflation levels for February were in line with market expectations, indicating favorable macroeconomic conditions for risk-on buyers. However, some on-chain and market indicators suggest a potential correction in the near term.
Sell Pressure Increases
On March 13, Glassnode’s exchange flow data recorded the most significant inflow to exchanges since May 2022, leading to potentially higher selling pressure. In addition, the coin days destroyed indicator, which measures the time-weighted transfers of Bitcoin, shows a small spike, indicating that old hands are moving coins. This signals profit booking by long-term holders, which can lead to a correction.
Elevated Funding Rate and Broadening Wedge Pattern
Furthermore, the funding rate for Bitcoin perpetual swaps is elevated with the latest Consumer Price Index print, meaning more traders are betting on the upside with leveraged positions. This increases the risk of a correction. BTC price is currently forming a broadening wedge pattern, depicting a heightened level of volatility, with both buyers and sellers pushing the price beyond support and resistance levels, resulting in quick reversals.
Positive Reaction to CPI Data
On Tuesday, the Consumer Price Index (CPI) for the US Bureau of Labor Statistics was up by 0.4% on a monthly basis, while the yearly rate declined to 6.0%. The CPI for the month met the forecasts, which is expected to keep the Federal Reserve committed to bringing down inflation to its 2.0% target. The crypto market reacted positively, with Bitcoin price rising to trade at $26,382, as lower inflation generally weakens the US Dollar, the reserve currency in which Bitcoin is priced.
Trend Direction and Profit Objective
From the weekly timeframe, Bitcoin’s trend direction has been south since topping out just beneath the $70,000 mark in late 2021. However, last week’s hammer candlestick pattern off the low $19,568, price action on the weekly scale—aided by the RSI attempting to cement position north of its 50.00 centreline—is threatening to take aim at a pattern profit objective set at $26,774, a level sheltered just south of weekly resistance at $28,844.
While the macroeconomic conditions currently favor risk-on buyers, certain on-chain and market indicators suggest a potential correction in the near term. The elevated funding rate for Bitcoin perpetual swaps, the broadening wedge pattern, and the profit booking by long-term holders due to the significant inflow to exchanges since May 2022 are all indicators of a potential correction.
Traders and investors should monitor these indicators to make informed decisions. Bitcoin was hovering around $25,000 at the time this article was written.