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31.03.2023 11:50 AM
Bitcoin Holds Positions Near $29k: Why Is Correction Still Inevitable?
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Over the past week, Bitcoin has suspended its upward movement, resting on a powerful resistance level of $28k. The cryptocurrency's capitalization has remained virtually unchanged over the past seven days, indicating a local pause for consolidation of necessary volumes.

There is also a high probability that the decline in Bitcoin's upside potential is directly related to the capitalization of the USDT Stablecoin. In such a scenario, the cryptocurrency's current rise is artificial, and a pullback in the value of the asset should be expected in the near future.

Is Bitcoin's upward movement a fake?

Data on U.S. GDP growth in Q4 2022 was released yesterday, which came out at 2.6%, against the forecast of +2.7%. This indicates the sustainability of the American economy, although there are some signs of a slowdown.

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Data on the labor market were also published, where the number of applications for unemployment benefits reached 198,000, with a forecast of 196,000. There are also certain signals of a weakening labor market, which may prompt the Fed to stop the current monetary policy.

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At the same time, the Fed continues to inject hundreds of billions into the U.S. economy, and in this regard, it might seem that some of these funds are deposited in Bitcoin. However, there is a high probability that the growth of BTC is provoked solely by capital movements within the crypto industry.

Is Bitcoin rising regardless of the Fed's balance sheets?

The rise in BTC quotes did coincide with the start of the Fed's stimulus program. Also, the rapid and steady growth of USDT capitalization began in parallel with this process. The correlation between the growth of stablecoin and BTC capitalization is also confirmed.

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However, at the same time, there is a massive outflow of capital from USDC and BUSD due to problems with U.S. regulators. There is a situation in which the largest exchanges manipulatively move their capital to other stablecoins before a large-scale check and simultaneously invest in BTC.

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Given that this process is short-term and aimed solely at preserving capital in the conditions of verification, we can expect the reverse process. Summing up the interim results, we can say that numerous facts indicate that the rise of BTC to $28k was fake.

BTC/USD Analysis

It is important to note that some of the Fed funds did penetrate into the crypto market. Michael Saylor's purchase of BTC above $20k may attest to this. This strengthened the shaky growth triggered by the infusion of large amounts of liquidity from cryptocurrency exchanges.

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Bitcoin retested the $29k resistance level twice this week. At the same time, the asset confidently holds the lower boundary of the $26.6k channel. However, on the daily chart, we see bearish signals on stochastics and MACD, which indicates growing pressure from sellers.

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Cryptocurrency trading volumes remain in the region of $20 billion, but the number of unique addresses in the BTC network holds the bar at 1 million. These data indicate that there are no large buyers in the Bitcoin market, and the price is systematically moving within the range of $26.6k–$29.1k without claims for a bullish breakdown of the upper limit.

Results

The foundation of the current upward movement was largely a manipulative and forced step. Infused liquidity remains in the market, but trading volumes are already declining. As of the end of March, Bitcoin has no fundamental reasons for a bullish breakout of $29k and further upward movement.

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Given this, the consolidation movement of the asset price will continue. In the future, we may expect additional feeding in the form of Fed liquidity. At the same time, BTC will likely pull back to $25k, but this process can be traced by the development of the conflict between the crypto exchanges and the U.S. regulator.

Artem Petrenko,
Analytical expert of InstaForex
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