Bitcoin: Will bearish sentiment let up next week?
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.
- A shorting opportunity could present itself amidst the volatility Bitcoin could encounter next week.
- Both bulls and bears could get chopped up in a consolidating market in the aftermath of the recent sharp drop.
The US Federal Open Market Committee (FOMC) is set to hold a meeting on 13-14 June. According to economists polled by Reuters, the US Federal Reserve will not raise interest rates in June. The Fed Chair Jerome Powell had signaled in May that the central bank might soon pause its hiking cycle.
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Now, what impact could this have on Bitcoin [BTC]?
Bitcoin’s transaction count reached 1 million for two consecutive days last week, but this could signal investors moving toward self-custody rather than an increase in buying pressure. The price action was bearish, and further losses were likely in the coming days.
The previous liquidity hunt could offer a shorting opportunity
Due to the FOMC meeting, volatility can be expected in the market. A pause in the hiking cycle would likely have a positive impact on the traditional markets, which could see a brief positive reaction in BTC’s price charts.
Some key levels on the chart were at $25.2k, $26.8k, and $27.8k levels. The market structure of Bitcoin was bearishly biased on the 4-hour chart, and the $27.4k level represented a recent lower high. A move above this level would indicate a shift in bias toward bullish patterns, although it could also be a bull trap.
To establish a short-term uptrend, Bitcoin would need to register a higher low.
Given the trend on the daily timeframe, further downside appeared likely. The A/D line lacked a strong trend in May, but it has crept lower. The CMF also showed heavy capital flow out of the market. Recent news from the SEC regarding Binance and major crypto assets labeled as securities does not help the bulls, either.
Hence, a move toward the recent lower high can be used to enter short positions. It could be a risky venture, and risk-averse traders can wait for Monday’s high and low to be established before looking for trades.
The dwindling CVD highlighted severe selling pressure in recent hours
Bitcoin dropped by 4.95%, measured from 9 June’s swing high to 10 June’s swing low. This could increase if BTC falls lower in the coming hours. Alongside falling prices, the spot CVD was in a steady downtrend as well, and has been over the past week.
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This highlighted selling pressure once more. Open Interest also indicated bearish sentiment.
On 6 June, when BTC bounced from $25.4k to $27.3k, the OI plummeted. This showed short covering drove the rally – the OI remained flat since then. Therefore, with sidelined speculators and bearish price action, bulls must be wary of buying BTC above the $25.2k support.