FX.co ★ Bitcoin moved sideways amid a collapse in trading volumes: Is correction inevitable?

After a strong upside move last week, Bitcoin moved into a consolidation stage near the $28k level. This was facilitated by a sharp drop in trading activity in the BTC network and a strong resistance area in the $30k–$31.5k region.

The crypto market capitalization is holding at $1 trillion, and BTC price is near $27.5k. Over the last two days, changes in market capitalization have been minimal, which may indicate a decline in investment interest in Bitcoin and the market.

Given the tension in the banking system of the U.S. and Europe, investor interest in the cryptocurrency market will continue to grow. At the same time, there are more and more signs that BTC will go to a local correction.

Fundamental factors

A key factor for Bitcoin's future accomplishments is the Fed's desire to sit on two chairs. On the one hand, the agency raises the rate by 25 basis points, but at the same time injects $90 billion into the banking sector every day.

Markets perceive the ambiguity of the Fed's actions with enthusiasm, but the IMF warns that inflation remains high. The U.S. central bank also said that it does not see the possibility of a rate cut in 2023. Given the forced infusion of funds into the economy, it is difficult to argue with this.

Moreover, according to BBG, the Fed's forced reaction to the banking crisis has prompted changes in the agency's long-term plans. Now the regulator is preparing for the inevitable recession of the U.S. economy, not a soft landing.

Fannie Mae experts say that the banking crisis has become a catalyst for future recession of the U.S. economy. A similar situation is observed in the EU, where the largest banks are experiencing a massive outflow of funds. We should not ignore the dangerous precedent, which will soon emerge in Switzerland with Credit Suisse bank.

BTC/USD Analysis

The banking sector of the world's largest economies is experiencing a massive outflow of funds, and Bitcoin has become one of the beneficiaries of such a flow of liquidity. The cryptocurrency has significantly strengthened its position and managed to reach $28k.

The final point of the local high over the past six months was $29.4k, set on Friday. Then the asset failed to realize the bullish momentum, thanks to the powerful response of the sellers. The $29k–$31.5k area looks impregnable at the moment, and it looks unlikely to break through it with a trade.

Given this, the bulls need to collect additional liquidity, which will allow them to make an impulse breakdown of this area. This implies that the cryptocurrency price will fall below key support areas. The collapsed trading volumes and growing profit-taking sentiment also hint at the possibility of a correction.

On the daily chart, we see signals from the RSI and MACD to continue the consolidation movement. The stochastic oscillator has formed a bearish crossover, so the asset has a chance to develop a local downward trend.

In general, Bitcoin enters the new trading week in the most inert state. The asset is moving within the $26.7k–$29.4k area, and there is every reason to believe that the cryptocurrency will continue its consolidation movement in the coming days.

Results

The market has exhausted the bullish momentum that formed last week and has moved into a flat. Fundamentally, Bitcoin is not exhausted but needs additional liquidity for a successful movement to $30k.

Given this, we can expect a corrective movement of BTC in the medium term. Among the key areas where large liquidity reserves are concentrated are $26.7k and $26.1k. Under favorable circumstances, the $24k–$25.2k area will be the final correction for the asset.