Key Takeaways:
- Bitcoin rally might not be long-loved, and technical indicators testify to a stall.
- Gaps in Bitcoin CME futures also point in a bearish direction.
- BTC inflow to exchanges and headwinds from the global economy seal the short-term bearish outlook.
YEREVAN (CoinChapter.com) – Bitcoin traded above $27,500 in the Asian-Pacific session on March 20 after breaking above the $25,000 resistance for the first time since June 2022. However, the jump might be a dead cat bounce and send the BTC price into a new bear phase. Here’s why.
#1 Technical indicators bearish
The BTC/USD price action faced divergences from the relative strength index (RSI) and the trading volumes. In short, while the price action has been establishing higher highs since mid-January, while the RSI printed lower highs. Such deviation predicts a looming price decline.
Additionally, the trading volumes declined since Sunday, March 12, while the BTC price has jumped 40% in the same period. The flagship crypto also retested a support-turned-resistance near $28,500, backing the bearish narrative.
#2 Bitcoin CME gap
Veteran trader and Factor LLC chief Peter Brandt agreed it’s too soon to ring bullish bells. In a recent tweet he encouraged “hot shot young guns to go short BTC,” based on the fact that there were “two huge unfilled gaps” on the Chicago Mercantile Exchange (CME) Bitcoin futures chart.
In short, the Bitcoin CME gap is the difference between the trading price of Bitcoin futures contracts when the market opens on Sunday, and when it closes on Friday.
From Friday to Sunday, the Bitcoin CME futures price is “fixed”, while Bitcoin’s price continues to move up (or down) on cryptocurrency spot exchanges. When the CME futures re-open, futures contracts catch up with spot prices, creating a gap.
Also read: Bitcoin Bulls Aim Big After Recent Surge Above $28K — Bull Trap or Continuation?
The significance of those gaps is that they tend to fill, meaning the price will likely decline to those levels. Notably, The CME gap doesn’t necessarily have to fill, it is just more likely to fill than not. Thus, when combined with other indicators, it backs the bearish narrative
#3 BTC on-chain metrics lag despite the price increase
According to the crypto analytical platform CryptoQuant, exchanges saw an increased Bitcoin inflow during the previous week. Typically, an asset influx to exchanges indicates traders’ reluctance to hold it, and, therefore, could result in a rally stall, or a price decline as it is swapped for fiat or other cryptocurrencies.
Moreover, Glassnode confirmed the possible capitulation and reported a $1.3 billion worth of difference between Bitcoin inflow and outflow from exchanges since March 13.
Bonus #4 Headwinds from the macroeconomy could hinder Bitcoin’s bullish prospects
The global banking system got hit in the second week of March, when several banks imploded, including the US banks Silvergate, Silicon Valley Bank, and Credit Suisse, risking to start a contagion among smaller financial services institutions.
While some retail investors might still see Bitcoin as an alternative to the traditional banking system, the narrative might not meet their expectations. The growing power imbalance among Bitcoin holders mirrors the fiat inequality, proving to be a poor substitute amid the bank runs.
Also read: US Market Ahead: Fed Rate Decision, S&P Global PMI, Durable Goods Order.
Torsten Slok, the chief economist at Apollo Global Management Inc., noted an additional problem. He commented that people are likely to face problems getting loans in the near future.
If it’s suddenly much harder to get an auto loan, a consumer loan, a mortgage for commercial real estate simply because smaller regional banks have to reorganize balance sheets, then you run the risk that many people won’t get the financing to buy that car, to buy that washer, and that corporate lending takes a hit.
said the expert.
Given the difficulties in basic necessities such as obtaining loans, the average retail investor is unlikely to turn to risk-on assets such as cryptocurrencies.
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