BTC Faces Risk of Sub-$28,000 on Hawkish Fed Chat and US Stats

Key Insights:

• BTC tumbled by 5.18% on Wednesday to end the session at sub-$29,000 for the first time since April 9.
• Inflation figures from the UK and the Euro Area sparked fears of further monetary policy tightening.
• The technical indicators turned bearish, signaling a return to sub-$28,000.

On Wednesday, bitcoin (BTC) tumbled by 5.18%. Reversing a 3.24% gain from Tuesday, BTC ended the day at $28,818. Significantly, BTC ended the session at sub-$29,000 for the first time since April 9.

A mixed start to the day saw BTC rise to a first-hour high of $30,412 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $30,889, BTC fell to a final-hour low of $28,582. BTC fell through the First Major Support Level (S1) at $29,531 and briefly through the Second Major Support Level (S2) at $28,671 before ending the day at $28,818.

UK and Euro Area Inflation Send BTC and the Crypto Market South

Economic indicators from the UK and the euro area spooked investors. Sticky inflation spells rate hikes and the threat of a global economic recession.

The UK annual inflation rate softened from 10.4% to 10.1% versus a forecasted 9.8. Euro area core inflation rate accelerated from 5.6% to 5.7%.

Despite aggressive policy moves to bring inflation to target, the latest figures suggest that more work is needed to tame inflation. Energy prices may have tumbled, but food prices have surged, supporting elevated inflation.

FOMC member commentary reignited Fed Fear this week. Following Christopher Waller’s hawkish comments last Friday, FOMC member James Bullard played down fears of a recession while pushing for more rate hikes to combat inflation.

There were no crypto market events to fuel the sell-off, with the pullback coinciding with the release of the UK and euro area CPI reports.

The sell-off came despite Republican Warren Davidson calling to remove Gary Gensler as Chair of the Securities and Exchange Commission.

During the Securities and Exchange Commission Oversight hearing on Tuesday, Davidson addressed the SEC Chair, saying,

“To correct a long series of abuses, I am introducing legislation that removes the Chairman of the Securities and Exchange Commission and replaces the role with an Executive Director that reports to the Board, where all authority resides. Former Chairs of the SEC will be considered ineligible.”

The Day Ahead

SEC v Ripple case-related chatter and Binance and Coinbase (COIN)-related news will draw interest. However, US lawmaker commentary and SEC and CFTC activity would move the dial following the Tuesday hearing.

This afternoon, US economic indicators and FOMC member chatter will also influence. Philly Fed Manufacturing Index and jobless claims figures will be in focus.

While another rise in jobless claims would signal a deterioration in labor market conditions, better-than-expected manufacturing numbers would support a hawkish Fed.

FOMC members Waller and Bowman will speak this afternoon. Hawkish chatter would test buyer appetite. On Friday, FOMC member Christopher Waller saw the need for more interest rate hikes, leading to a jump in the probability of a 25-basis point Fed interest rate hike in May.

Bitcoin (BTC) Price Action

This morning, BTC was up 0.03% to $28,826. A mixed start to the day saw BTC fall to an early low of $28,739 before rising to a high of $28,827.

Technical Indicators

Resistance & Support Levels

BTC needs to move through the $29,271 pivot to target the First Major Resistance Level (R1) at $29,959. A return to $29,500 would signal an extended bullish session. The crypto news wires and Fed commentary should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test resistance at the Wednesday high of $30,412 but fall short of the Second Major Resistance Level (R2) at $31,101. The Third Major Resistance Level (R3) sits at $32,931.

Failure to move through the pivot would leave the First Major Support Level (S1) at $28,129 in play. However, barring another data-fueled sell-off, BTC should avoid sub-$28,000 and the Second Major Support Level (S2) at $27,441. The Third Major Support Level (S3) sits at $25,611.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was bearish signals. BTC sat below the 100-day EMA ($29,260). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, sending bearish signals.

A move through the 100-day EMA ($29,260) would support a breakout from the 50-day EMA ($29,705) to give the bulls a run at R1 ($29,959) and the Wednesday high of $30,412. However, a fall through 200-day EMA ($28,176) and S1 ($28,129) would bring sub-$28,000 Support Levels into view. A move through the 50-day EMA would send a bullish signal.