BTC Faces Risk of Sub-$29,000 as Focus Turns to Gensler and Capitol Hill

Key Insights:

• BTC hit reverse on Monday, falling by 2.80% to end the session at $29,437.
• US regulatory activity and Fed Fear left BTC at sub-$30,000 for the first time in five sessions.
• The technical indicators were mixed, signaling a choppy Tuesday session.

On Monday, bitcoin (BTC) fell by 2.80%. Reversing a modest 0.03% gain from Sunday, BTC ended the day at $29,437. BTC wrapped up the day at sub-$30,000 for the first time in five sessions.

A mixed start to the day saw BTC rise to a first-hour high of $30,290 before hitting reverse. Coming up short of the First Major Resistance Level (R1) at $30,572, BTC fell to a late afternoon low of $29,262. The reversal saw BTC fall through the Major Support Levels. However, BTC found late support to move back through R3 ($29,297) to end the day at $20,437.

BTC Succumbs to Increased Regulatory and Lawmaker Scrutiny

US economic indicators failed to provide support on Monday, despite the NY Empire State Manufacturing Index rising from -24.6 to +10.8. Economists forecast a more modest rise to -18.0.

An improving macroeconomic environment paves the way for the Fed to continue raising interest rates to bring inflation to target. Since returning to $30,000, BTC has struggled, with hawkish Fed commentary fueling the expectation of post-May interest rate hikes to test buyer appetite.

According to the FedWatchTool, there is a 91.0% probability of a 25-basis point Fed interest rate hike in 15 days. One month ago, there was a 20.7% chance of a 25-basis point May interest rate hike. Significantly, there are also increasing bets of a 25-basis point hike in June, up from 0% in March to 18.4% this morning.

Hopes of an H2 2023 interest rate cut are also subsiding. There is a 2.1% chance of a 25-basis point interest rate cut in July, down from 15.4% one month ago.

A hawkish policy outlook questions the Fed’s projected mild recession in late 2023 and raises the threat of a global credit crunch.

Increased regulatory and lawmaker scrutiny added to the bearish mood. News of the SEC charging Bittrex with operating an unregistered securities platform weighed on investor sentiment.

Regarding the charges, SEC Chair Gary Gensler said,

“Today’s action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity.”

The move against Bittrex follows the shift in SEC focus to the DeFi space, which brings more platforms under the scrutiny of the SEC.

The Day Ahead

Investors should continue monitoring the crypto news wires for SEC v Ripple case-related chatter and Binance and Coinbase (COIN)-related news. However, regulatory activity, US lawmaker commentary, and Fed chatter would also move the dial.

On Capitol Hill, the SEC Chair will give testimony to lawmakers at a digital asset sub-committee hearing. SEC Chair Gary Gensler will likely face lawmaker scrutiny on its regulation by enforcement mantra, the SEC’s links with FTX and its failings to prevent its collapse, and possibly the SEC v Ripple case.

Economic indicators will also draw interest. We should see BTC price sensitivity to Q1 GDP numbers from China this morning. However, investors should also track Fed chatter, with hawkish commentary likely to test buyer appetite.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.01% to $29,433. A range-bound start to the day saw BTC fall from an opening price of $29,437 to a low of $29,433.

Technical Indicators

BTC needs to move through the $29,663 pivot to target the First Major Resistance Level (R1) at $30,064 and the Monday high of $30,290. A return to $30,000 would signal an extended bullish session. The crypto news wires 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 $30,691 and resistance at $31,000. The Third Major Resistance Level (R3) sits at $31,719.

Failure to move through the pivot would leave the First Major Support Level (S1) at $29,036 in play. However, barring an event-fueled sell-off, BTC should avoid sub-$29,000 and the Second Major Support Level (S2) at $28,635. The Third Major Support Level (S3) sits at $27,607.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was mixed signals. BTC sat above the 100-day EMA ($29,140). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened further from the 200-day EMA, sending mixed signals.

A move through the 50-day EMA ($29,728) would support a breakout from R1 ($30,064) to target R2 ($30,691) and $31,000. However, a fall through 100-day EMA ($29,140) and S1 ($29,036) would bring S2 ($28,635) into view. A move through the 50-day EMA would send a bullish signal.