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Can Bitcoin Bounce Back To $35K? Here’s What Stands In The Way

Reynaldo Marquez by Reynaldo Marquez
1 year ago
in Bitcoin
Reading Time: 3 mins read

No action in the crypto market as Bitcoin still trades around the $29,000 to $30,000 area. The first crypto by market cap has been rangebound since the Terra ecosystem collapsed taking a hit on an already soft market.

Related Reading | Mr. Wonderful-Backed Green Bitcoin Mining Venture To Build $500M HQ In N. Dakota

The “Black Swan” event has preceded one of the worst periods for the space as Bitcoin and Ethereum recorded record consecutive losses. At the time of writing, BTC’s price trades at $29,500 with a 2% loss in the last 24-hours.

Bitcoin BTC BTCUSD
BTC moving sideways on the 4-hour chart. Source: BTCUSD Tradingview

According to a pseudonym trader, Bitcoin could be ready to re-test the lows at $29,000 before resuming its bullish momentum. The trader expects BTC’s price to potentially dip below this level and then bounce back to $35,000.

This would put Bitcoin close to the bottom of its current range. Therefore, a move to the upside and some relief seems logical, if BTC is to continue to trend rangebound.

In that sense, the pseudonym trader recommended to “play the trend” and re-examining if BTC breaks above those levels. The trader said via Twitter:

Before you get discouraged about trading just remember this tiny little range of chop is what’s been so difficult for everyone to figure out. Once a direction is established from here it’ll get easier.

A report from QCP Research agrees that $28,700 is a major area of support, in case of further downside, as it stands as BTC’s current 61.8% Fibonacci retracement level. These Fibonacci levels have been “pivotal”, the report says, for Bitcoin across its history.

Particularly during 2020, when the start of the COVID-19 pandemic sent BTC to test the 61.8% Fibonacci level at around $3,800. This level was held during one of BTC’s worst drawdowns. QCP Research said:

For BTC and ETH, the current drawdown is now identical to the 2020 Covid drawdown. It is possible that we see a short-term bounce from these oversold levels.

Why Bad News Is Good For Bitcoin And Risk Assets

In addition, the report claims BTC, and other risk-on assets seem inversely correlated to the media. Whenever “good news” on inflation, unemployment, and other metrics in the U.S. break to the public, these assets seem to trade to the downside.

The opposite happened from 2020 to 2021 as bad news on COVID-19 translated into an economic stimulus. Now, the U.S. Federal Reserve (FED) is determined to stop inflation and has begun removing liquidity from global markets while it launches its Quantitative Tightening (QT) program.

This will force the institution to unload its balance sheet into global markets. As a result, Bitcoin and stocks will continue to suffer in the coming months, QCP Research believes. The report claimed:

This draining of liquidity will only be exacerbated by the upcoming QT balance sheet unwind as well, beginning 1 June. We expect these factors to weigh on crypto prices.

The current narrative in mainstream media is running on the back of inflation. If it changes to words like “recession” or “economic recession”, the U.S. FED might be forced to slow down on its tightening giving some relief for Bitcoin and stocks, the report claims.

Related Reading | Arthur Hayes Says Bitcoin And Ethereum May Not Be Ready To Recover Drastically

In other words, if news shifts from bad to worse, Bitcoin could change its direction to the upside. In the meantime, it seems likely to remain rangebound or with short live rallies.

Tags: bitcoinBTCBbtcusd
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Reynaldo Marquez

Reynaldo Marquez

As an editor at NewsBTC, Reynaldo is an experienced journalist passionate about all things crypto. Reynaldo has interviewed key industry leaders, and created unique pieces analyzing the promise of crypto as the next frontier for an economic and social transformation of humanity. Since 2018, he has been at the forefront of the industry, closely following every major development and analyzing critical events at the heart of the crypto industry. With a keen eye for detail and an unwavering commitment to excellence, Reynaldo has been instrumental in bringing the latest news and insights to the crypto community. Outside of work, Reynaldo enjoys lifting weights and literature, which he believes gives him a unique perspective into the world of crypto. As an aspiring trader, he is always looking for new opportunities to explore and believes that crypto holds the key to unlocking the future of finance.

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