BTC Faces Sub-$26,500 as Recession Fear and Lawmaker Scrutiny Bite

Key Insights:

• On Friday, BTC extended its losing streak to three sessions, falling by 3.40% to end the day at $27,287.
• Fed Fear and recession jitters continued to grip crypto investors despite better-than-expected US private sector PMI numbers.
• The technical indicators are bearish, signaling a return to $25,000.

On Friday, bitcoin (BTC) fell by 3.40%. Following a 1.98% decline on Thursday, BTC ended the day at $27,287. Significantly, BTC ended the day at sub-$28,000 for the first time since March 28.

A mixed start to the day saw BTC rise to a first-hour high of $28,381 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $28,893, BTC fell to a late low of $27,155. BTC fell through the First Major Support Level (S1) at $27,807 and the Second Major Support Level (S2) at $27,367 to wrap up the day at $27,287.

Fed Fear and US Recession Fears Weigh on Buyer Appetite

Investors brushed aside better-than-expected US private sector PMIs on Friday. The all-important US Services PMI rose from 52.6 to 53.7, with the manufacturing PMI up from 49.2 to 50.4.

On Thursday, US jobless claims, the Philly Fed Manufacturing Index numbers, and UK and euro area inflation figures from Wednesday sounded the alarm bells. Hawkish Fed chatter has also fueled fear of a hard landing, with several members, including James Bullard, Christophe Waller, and John Williams driving bets of rate hikes beyond May.

While sentiment toward Fed monetary policy and the UK economy was bearish, US Treasury Secretary Janet Yellen added to the bearish mood.

On Friday, the US Department of the Treasury released Secretary of the Treasury Janet Yellen’s remarks from the Financial Stability Oversight Council Meeting. The focus was on nonbanks, which can include crypto-related firms, with greater oversight likely, including the possibility of supervision by the Federal Reserve.

Despite the bearish backdrop, US equities ended the Friday session with modest gains. The NASDAQ Composite Index rose by 0.11%, with the Dow and S&P 500 ending the day up 0.07% and 0.09%, respectively.

The Day Ahead

There are no US economic indicators to influence, leaving Fed commentary to draw interest.

However, SEC v Ripple case-related chatter and Binance and Coinbase (COIN)-related news will provide direction. After the Securities and Exchange Commission Oversight hearing, US lawmaker commentary and SEC and CFTC activity also need consideration as the US administration looks to tighten its grip on the digital asset space.

Bitcoin (BTC) Price Action

This morning, BTC was up 0.14% to $27,324. A mixed start to the day saw BTC rise to an early high of $27,332 before falling to a low of $27,273.

BTC Technical Indicators

Resistance & Support Levels

BTC needs to move through the $27,608 pivot to target the First Major Resistance Level (R1) at $28,060 and the Friday high of $28,381. A return to $28,000 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 $28,834. The Third Major Resistance Level (R3) sits at $30,060.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,834 in play. However, barring another sell-off, BTC should avoid sub-$26,500 and the Second Major Support Level (S2) at $26,382. The Third Major Support Level (S3) sits at $25,156.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was bearish signals. BTC sat below the 200-day EMA ($28,163). The 50-day EMA converged on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, sending bearish signals.

A move through R1 ($28,060) and the 200-day EMA ($28,163) would give the bulls a run at R2 ($28,834), and the 100-day ($29,001) and 50-day ($29,060) EMAs. A breakout from the 50-day EMA would bring R3 ($30,060) into play.

However, a bearish cross of the 50-day EMA through the 100-day EMA would support a fall through S1 ($26,834) to test buyers at $26,500. A move through the 50-day EMA would send a bullish signal.