There was no action in the crypto market as bitcoin still trades in the $29,000 to $30,000 area. The first crypto has been rangebound by market cap since the Terra ecosystem hit the already soft market.
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The “Black Swan” event is one of the worst periods for the space as Bitcoin and Ethereum have posted consistent losses. At the time of writing, BTC price is trading at $29,500, down 2% over the past 24 hours.
According to a pseudonymous trader, bitcoin may be ready to retest the $29,000 low before resuming its bullish momentum. The trader expects the BTC price to potentially drop below this level and then return to $35,000.
This would put bitcoin closer to the bottom of its current range. Therefore, if BTC is to continue the range-bound trend, a move to the upside and some respite seems logical.
In that sense, the pseudonymous trader recommends “running the trend” and retesting if BTC breaks above those levels. merchant Told Via Twitter:
Before you despair about trading, just remember that understanding this tiny little bit of chop makes it so difficult for everyone else. Once the direction is decided from here it will be easy.
A report from QCP Research agrees that $28,700 is a key area of support, and in case of further downside, as it stands as BTC’s current 61.8% Fibonacci retracement level. The report says that these Fibonacci levels have been “important” in the history of Bitcoin.
Especially during 2020, when the onset of the COVID-19 pandemic sent BTC testing the 61.8% Fibonacci level at around $3,800. This level was held during one of BTC’s worst drops ever. QCP Research said:
For BTC and ETH, the current drop is now similar to the 2020 Covid drawdown. It is possible that we could see a short term bounce off these oversold levels.
Why bad news is good for bitcoin and riskier assets
Furthermore, the report claims that BTC and other risk assets are inversely related to the media. These assets trade downward whenever the “good news” on inflation, unemployment and other indicators in the US breaks out to the public.
The opposite happened in the form of economic stimulus in the form of bad news on COVID-19 from 2020 to 2021. Now, the US Federal Reserve (FED) is determined to contain inflation and has begun to remove liquidity from global markets, while launching its quantitative tightening (QT) programme.
This will force the institution to roll out its balance sheet to global markets. As a result, bitcoin and equities will continue to suffer in the coming months, believes QCP Research. The report claimed:
This withdrawal of liquidity will only end in the upcoming QT balance sheet as well, beginning June 1. We expect these factors to weigh on the crypto prices.
The current narrative in the mainstream media is running on the back of inflation. The report claimed the US Fed could be forced to slow its tightening in order to offer some relief for bitcoin and stocks if it turns to terms like “recession” or “economic slowdown”. .
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In other words, if the news turns from bad to worse, bitcoin could change direction. Meanwhile, it is likely to remain in a limited range or with short live rallies.