In the last few days, leveraged long bets in the Bitcoin futures market have been getting “rekt,” which means they have been closed out. Data from the crypto derivatives tracking website coinglass.com shows that long positions have been sold for more than $150 million in the last three days.
In fact, Bitcoin has dropped 10% in the last three days, from the mid-$30,000s to the low-$27,000s. This is one of the most intense times since the beginning of the year when long positions have been sold.
This week, selling pressure picked up when the BTC price fell below key support in the $29,000 area. This support came in the form of 1) the 21-day moving average, 2) an increase from late March, and 3) the highs from late March.
Since this bearish break, experts have been looking for a retest of support in the area between $26,500 and $800. This area is made up of a support level that turned into resistance in March and the 50-day moving average (50DMA).
The almost 10% drop in Bitcoin’s price over the past week may be partly due to changes in the economy as a whole. This would be Bitcoin’s worst weekly drop since the FTX scandal in November.
Survey data from the US has drawn a mixed picture of the economy’s momentum, making it harder to predict the economy’s future and the Fed’s plans for further tightening.
This, along with UK inflation data that was much higher than expected, has made US yields go up this week, which is usually bad for non-yielding crypto assets like Bitcoin.
Some experts say that uncertainty about the regulatory situation in the US is another thing that is putting pressure on crypto. SEC Chair Gary Gensler’s appearance before Congress earlier this week didn’t do much to clear up the situation.
At the same time, the EU’s landmark crypto rules didn’t do much to make people feel better.
In fact, this week seems to have been driven by 1) taking profits after a very good start to the year, which has led to 2) the selling off of a lot of overly optimistic or greedy bulls who thought Bitcoin would keep going up above $30,000.
Last week, when the BTC price hit new 10-month highs above $30,000, a number of indicators showed that the Bitcoin market may have been too hot in the short run.
The 14-Day Relative Strength Index had gone above 70, which meant that the market had been bought up too much. It has now dropped to around 42, and if Bitcoin keeps going down, it could soon show that the market is overdone.
At the same time, the rolling 30-day return on BTC had reached its best level since late November.
As more confidence fades, there is a good chance that Bitcoin will continue to fall back toward support in the $25,200-$4,400 range in the next few days or weeks.
But this shouldn’t hurt the long-term bull market theory too much, and it could be a great time for long-term bulls to get back into the market.
According to an article published on Thursday, the 25% delta skew of short-term Bitcoin options has gone negative, but the skew of longer-term options is still positive.
When you look at macro factors, on-chain trends, and medium- to long-term technical signs, it makes sense to be confident about Bitcoin’s price in the long run.
There is still a lot of doubt about how many more times the US Federal Reserve will raise interest rates and when it will start lowering them. However, one thing seems clear: the Fed’s tightening cycle is coming to an end as inflation and economic growth in the US slow down.
That means that changes in the economy that aren’t good aren’t likely to be a big problem for crypto markets in 2023 like they were in 2022.
In the meantime, Bitcoin is likely to keep getting a boost from recent technical events like 1) Bitcoin’s big jump from its 200DMA and Realized Price in the middle of March and 2) Bitcoin’s “golden cross” in early February, when the 50DMA went above the 200DMA.
A lot of on-chain and market cycle signs are shouting that the crypto bear market ended at last year’s lows. Many buyers will still be sure that Bitcoin’s bull market in 2023 will keep going strong.
As a result, deal hunters and “dip buyers” will be eagerly waiting on the sidelines to jump in whenever Bitcoin’s price drops significantly, as it did in mid-March.
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