Bitcoin Bears to Target Sub-$21,000 on Fed Fear and Regulatory Jitters

Key Insights:

• It was a bearish Wednesday session, with BTC sliding by 2.23% to end the day at $21,713.
• News of Silvergate Bank planning to voluntarily liquidate sent BTC and the broader crypto market into the red.
• Technical indicators are bearish, with sub-$20,000 in view.

On Wednesday, bitcoin (BTC) slid by 2.23%. Following a 0.87% fall on Tuesday, BTC ended the day at $21,713. BTC wrapped up the day at sub-$22,000 for the first time since February 13.

A mixed start to the day saw BTC rise to an early high of $22,291. Coming up short of the First Major Resistance Level (R1) at $22,525, BTC slid to a final-hour low of $21,619. BTC fell through the First Major Support Level (S1) at $21,921 and briefly through the Second Major Support Level (S2) at $21,634 before ending the day at $21,713.

Silvergate Bank and Fed Chair Powell Returns BTC to Sub-$22,000 Levels

It was a busy day on the US economic calendar. Following hawkish Fed Chair Powell testimony from Tuesday, the US labor market was in the spotlight.

The numbers supported a more hawkish Fed interest rate trajectory to bring inflation to target. According to the ADP, nonfarm payrolls increased by 242k in February versus a forecasted 200k rise. Payrolls saw a more modest 119k increase in January.

JOLT job openings also beat expectations. Job openings stood at 10.824 million in January versus a forecasted 10.5 million. However, job openings were down from 11.234 in December.

Following the labor market numbers, Fed Chair Powell delivered a second day of testimony. However, the markets showed little interest following the Tuesday sell-off. The NASDAQ Composite Index rose by 0.40%. This morning, the NASDAQ mini was down 5.5 points.

While US economic indicators and Fed Fear weighed on investor sentiment, the crypto news wires did the damage.

On Wednesday, news hit the wires of Silvergate Bank planning to shut its doors. The crypto-friendly bank reported a $1 billion loss in Q4 2023, with a bank run leaving the bank with no alternatives. Silvergate Bank reportedly stated that the winding down and liquidation plans include the full repayment of deposits.

The bank’s voluntary liquidation means that Main Street is feeling the impact of the FTX collapse. We expect the crypto market to face increased scrutiny as US lawmakers and regulators consider the crypto market impact on financial stability.

The Day Ahead

US jobless claims and Fed chatter will influence the afternoon session. Following hotter-than-expected labor market numbers on Wednesday, initial jobless claims will draw interest. Sub-200k levels would continue to signal another solid increase in nonfarm payrolls and a steady US unemployment rate of 3.4%.

US economic indicators and Fed chatter have refueled bets of a 50-basis point Fed rate hike in March. The hawkish outlook remains BTC negative.

Beyond the US economic calendar. crypto news events will continue to influence, with regulatory activity and lawmaker chatter the market focal points. Binance and FTX updates and news from the ongoing SEC v Ripple case need monitoring.

Bitcoin (BTC) Price Action

This morning, BTC was up 0.09% to $21,732. A mixed start to the day saw BTC fall to an early low of $21,690 before rising to a high of $21,732.

Technical Indicators

BTC needs to move through the $21,874 pivot to target the First Major Resistance Level (R1) at $22,130 and the Wednesday high of $22,291. A return to $22,000 would signal a bullish session. The crypto news wires and US economic indicators should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $22,546 and resistance at $23,000. The Third Major Resistance Level (R3) sits at $23,218.

Failure to move through the pivot would leave the First Major Support Level (S1) at $21,458 in play. However, barring a crypto event-fueled crypto sell-off, BTC should avoid sub-$21,000. The Second Major Support Level (S2) at $21,202 should limit the downside.

The Third Major Support Level (S3) sits at $20,530.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. BTC sat below the 50-day EMA ($22,536). The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, delivering bearish signals.

A move through R1 ($22,130) would give the bulls a run at the 50-day EMA ($22,536) and R2 ($22,546). A move through the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA ($22,536) would leave the Major Support Levels in play.