Key Takeaways:
- Bitcoin gained from the debt ceiling uncertainty, jumping above $28K and declining shortly after.
- The flagship crypto decoupled from the stock market.
- On-chain metrics show accumulation, but technicals are not optimistic in the short term.
YEREVAN (CoinChapter.com) – Bitcoin briefly shot past $28,000 in the Asian Pacific session on May 29, after a 9% uptick since May 25 regarding the possible debt ceiling resolution. However, the bulls could not keep the momentum, and the alpha crypto slid to $27,900 hours later, suggesting more turbulence ahead.
Thus, a deep dive into Bitcoin’s technicals, on-chain metrics, and the changing macro environment is warranted.
Bitcoin’s correlation with stocks at a 17-month low
The flagship crypto highly correlated with the stock market in 2022. Thus, equities allowed for determining potential BTC fluctuations based on the largest US stock markets indexes, such as Nasdaq-100 and S&P 500.
However, the incentive connection has decreased since Q4, 2022. Moreover, according to crypto research platform K33, Bitcoin’s correlation with stocks reached a 17-month low in late May. The implications of the dissolution could be diverse.
The K33 report suggested that BTC could reclaim its role as a successful portfolio diversifier. “A monthly rebalanced portfolio with a 3% BTC allocation would’ve outperformed the 60/40 portfolio by 6.9% since the 2017 peak,” asserted the platform.
However, the return of the ‘digital gold‘ narrative is not a given. Experts also disagree on the matter. For example, according to Lapo Guadagnuolo, director at S&P Global Ratings, “there’s not enough data” to suggest that crypto is a safe-haven option in the mounting crisis.
Meanwhile, Steven Lubka, a managing director at Swan Bitcoin, asserted that if the US defaults on its debt and “everyone freaks out, bitcoin could do very well in that scenario,” citing the crypto’s limited supply, decentralized and non-sovereign properties.
Accumulation – ON
Bitcoin’s on-chain metrics suggest growing accumulation, which could be a bullish factor for the crypto. According to research platform CryptoQuant, Bitcoin’s exchange reserves have thinned year-to-date, reaching approximately $2.1 million on May 29.
The chart below shows that the exchange reserves have an erratic inverse correlation to the BTC price. Understandably, the diminishing BTC on exchanges shows investors choosing to HODL their coins, expecting gains rather than exchanging them for other crypto or fiat currencies.
Additionally, according to Glassnode, the amount of HODL-ed or lost Bitcoins reached a five-year high of 7.7 million BTC.
Accumulation is a bullish factor for Bitcoin, but the technical indicators don’t align with the prognosis, suggesting an 8% decline ahead, at least in the short term.
Bitcoin technicals suggest an 8% correction
According to the chart below, Bitcoin has formed a technical pattern dubbed the “descending channel,” best visible on the four-hour chart. The setup consists of two parallel trendlines that take the price incrementally lower through consecutive support and resistance retests.
BTC retested the channel’s resistance upon peaking over $28,400 on May 29. However, the token price has declined by 2%, possibly heading toward support. If so, the target price before the end of the week on June 4 would be approximately $25,600, or 8% lower than the current value.
The declining trading volumes on the daily chart support the bearish short-term forecast.
Also read: Bitcoin Price Runs Into Crucial Resistance – Can The Bulls Make It?
Naturally, the technicals alone are not enough to draw definitive conclusions.
Plus, the strong accumulation and Bitcoin’s decoupling from stocks hint at the return of the safe-haven narrative. However, traders should exercise caution, as the tentative “digital gold” status is not permanent, and, as Guadagnuolo pointed out, there’s not enough data to suggest a confident uptrend ahead.
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