The king coin, Bitcoin had been holding on strong near the $30,000 mark for the last couple of days and finally it retreated from those levels back to trading below the $29,000 mark as of writing this article. While the exact reason behind these price movements is hard to be determined, there are a few market indications that suggest that Bitcoin might see some weakness in the immediate future.
Bitcoin price breached the crucial $30,000 level on April 11 and since then had managed to sustain somewhere above it. It did see a fall below the $30,000 mark on April 17 but quickly recovered back above on the next day. But on April 19, we saw the BTC prices crashing well down below the $30,000 level and holding on below it.
Scalding Hot UK Inflation Data!
While Bitcoin was having a tough time breaking out of the crucial supply zone of the $30,000 mark – this new development from the United Kingdom hit it hard. The bulk of the decline in BTC price on April 19 came after the UK consumer price index (CPI) data was released. The CPI data showed that UK inflation had held on strong above the 10% mark in the month of March 2023.
This kind of inflation number coming from an economy as major as the UK is a worrisome matter since it would result in the nation’s central banks using the only option they have to reduce inflation, i.e. increase interest rates. And simple economic principles tell us a high-interest environment is never suitable for any growth in the economy. Higher interest rates directly mean a higher cost of money and higher cost of borrowing, thus making it more difficult for businesses to raise capital in this environment to run their businesses.
A major part of Bitcoin’s rally, since the beginning of 2023 was led by the speculation that rate cuts in major economies of the world were imminent after almost a year of increasing interest rates, post the Covid-19 lockdown period. Now, this kind of high inflation situation, which will logically be followed by a high-interest rate regime is what put a halt in the Bitcoin rally.
$30,000 is a Major Supply Zone
Apart from global headwinds, there are other factors too that are contributing to Bitcoin’s recent fall in price. A major technical reason is that the $30,000 mark is a crucial supply zone for BTC price. As mentioned in one of our articles, in a report by Glassnode – a crypto on-chain analytical platform,
” In 2023, a total of 6.2M BTC have returned to profit (32.3% of supply), giving an indication of just how large this cost basis foundation is below $30k.”
Thus, nearly one-third of the total Bitcoins that will ever exist, i.e. 21 million, is now in the profitable zone, according to data from Glassnode. Out of the holders of these 6.2 million BTC, some could be looking for a way out to sell some tokens and realize some profits on their books.
Thus this situation of so many Bitcoin HODLers and traders being in the profitable zone after a very long period of seeing unrealized losses on their books tends to create some profit booking at higher levels. This kind of profit booking in turn results in that price level becoming a very strict resistance zone as there is a lot of supply.
Read more: Bitcoin Soars 80% in 2023
So, Will Bitcoin Continue Falling?
From the looks of it, there could be a sustained period of BTC price flinging about the $30,000 mark before it is able to actually break past it. Bitcoin bulls would require a lot of strength and capital to be able to absorb all the supply coming into the market at those levels and finally be able to breach it.
BTC/USD | Source: TradingView
Overall, from a technical point of view, this minor fall in BTC price is nothing to lose sleep over and it is still well-positioned to continue its rally. It is within its accumulation zone (marked in grey) between $28,500 and $32,000 as of writing and the Bitcoin price is also on an upward trajectory (as indicated by the diagonal blue trendline).
The Relative Strength Index for the king coin is also optimally valued to support an upward move going forward. BTC price is also trading above both the 50 and 200-day moving averages. As long BTC is able to hold on above the $27,000 to $28,000 region, there is no immediate major downside risk in the price of the token.
Read more: Bitcoin Price Prediction
Values as on April 20, 2023.
