Bitcoin has been in an upward trend since early January, and during this period, the cryptocurrency managed to reach a local high of $24k. The asset made its final breakthrough to the psychological level after a local consolidation near $22.9k–$23.4k.
Subsequently, buyers managed to nail the $24k round level, but since then, the situation has not changed dramatically. On the contrary, there is a local decrease in trading activity and weakness of buyers. Bitcoin failed to hold the $23.5k level, and the asset collapsed below $23k.
As a result, BTC made a false exit out of $22.9k–$23.4k range. The powerful decline in price at the end of yesterday's trading session confirms the growing strength of the sellers. However, should we consider the temporary activation of bears as the beginning of corrective price movement?
Factors of BTC price movement
One of the key factors in the decline in the price of Bitcoin was a similar movement in the S&P 500 index. The indicator fell to a key support level of $4,000 and, judging by technical metrics, will continue to decline. Given the high level of correlation, BTC may follow the stock index.
Another reason for the likely decline in Bitcoin quotes may be the data provided by CoinShares. According to analysts, companies and retailers have invested more than $117 million in BTC products, the largest result since the beginning of 2022.
However, it is important to note that more than 99% of this amount consists of open long positions. The movement of the fear and greed index towards 60 confirms the emergence of negative sentiment, which can lead to increased volatility and impulsive price movements in order to knock out longs/shorts.
The Fed meeting tomorrow could also be a catalyst for a downward movement in the crypto currency. According to most forecasts, the rate will be raised by 0.25%, but the statement of department officials is much more important. And here, the markets can expect an unpleasant surprise, as the PCE inflation index is much higher than expected.
This could lead to negative rhetoric from the Fed and dampen investment fervor. It is also important to note that in the medium term, the vast majority of investors expect stock prices to update local lows, according to a BBG survey.
BTC/USD Analysis
As of Sunday's results, Bitcoin made a bullish breakout of the $22.9k–$23.4k trading area. The asset spent the first half of Monday in the consolidation movement, but with the opening of the U.S. markets, the price collapsed. As a result, BTC formed a "bearish absorption" pattern, and from today's price movement dynamics we can understand whether the correction of the asset has come.
At the moment, the cryptocurrency reached $22.5k, where there was an activation of buyers who forced out sellers above $22.9k. Despite the fact that the buyout took place, its end result raises questions about the strength and confidence of the bulls.
BTC technical metrics start a recovery movement from the sideways, smoothly turning into a new bullish momentum. Given this, we should expect an attempt to re-storm the $23k level. If the asset gains a foothold above this level, the bullish idea to $24k will become relevant again.
If Bitcoin closes below $23k, the road to the $22.4k level opens for the bears. With a successful breakdown of this indicator, the price will go to the 0.236 Fibonacci level in the region of $21.6k. If the downward price movement is accompanied by a change in market sentiment, a retest of the $20.2k–$20.8k level is likely.
Results
Bitcoin has very likely reached the peak of the January bull trend at around $24k. This month, the market sentiment has changed significantly, and BTC has reached the overbought zone by most parameters. Given this, we expect a local correction, which will allow the asset to update local highs in the near term.
