The previous week ended with the beginning of a long-awaited corrective movement for Bitcoin. At the end of Thursday, the cryptocurrency formed the largest red candle from November 9, and the price made a bearish breakdown of the $22k level.
Bitcoin spent the weekend calmly consolidating below the $22k area. Buyers managed to stop the fall, and the price consolidated near the $21.8k support area.
There are no clear signals for further price movement due to a decline in trading activity. However, this week can be the starting point for a deeper correction and a resumption of the bullish trend.
Inflation data
The Wall Street Journal reported that investors expect a probable extension of the key rate hike cycle by one month. They also noted the strong labor market as the main argument of the Fed in extending the period of raising the key rate.
But there is a possibility that this will not happen if the pace of inflation decline accelerates. That is why the publication of statistical data on the consumer price index this week may become a key signal that will set the medium-term trend for the movement of risky assets.
The consumer price index is at 6.5%, and according to the forecasts, the index will fall to 5%. Experts are betting on a further acceleration of the deflationary movement, and if the forecasts do not match the facts, the market reaction could be painful.
In addition, the Securities and Exchange Commission is actively taking on the crypto market. The SEC recently succeeded in halting the stacking of a major U.S. crypto exchange. As of February 13, the regulator also influenced Paxos to stop the issuance of BUSD stablecoin.
All actions of the SEC at the current stage have clearly negative consequences for the crypto market, as they scare away investors. In the long term, this may be a positive signal due to the likely increase in the level of security in the crypto market, but right now, the SEC policy is destructive for the price of crypto assets.
Bitcoin and SPX
Bitcoin retains a high correlation with the SPX index, and, as already noted, it was the activation of sellers on the stock market that contributed to the fall of both risky assets. According to Santiment experts, the positive correlation of BTC and SPX complicates the upward movement of the cryptocurrency.
In addition, experts from the world's leading banks predict an early completion of the SPX rally and the beginning of a corrective movement to $3,500–$3,600. Morgan Stanley once again said that investor interest in SPX and stock indices reached a peak, after which a sell-off usually followed.
BTC/USD Analysis
Over the weekend, we saw local attempts by buyers to break through the round level of $22k. These attempts were completely absorbed by the sellers, after which the price returned to the usual area of $21.5k–$21.8k.
Much of Bitcoin's further movement in the coming days will depend on the behavior of the stock market, and hence the results of the deflationary movement. If the forecasts correspond to the actual data, we should expect an upward movement of Bitcoin to the levels of $22.5k–$22.7k, where there is a local resistance zone.
Subsequently, the cryptocurrency will need to gain a foothold above $23k in order to finally level out the bearish scenario. Otherwise, the price will start to decline, and the expected targets will be Fibo levels. This means that BTC/USD will move to the second stage of correction, which may become deeper.
Results
In any of the cases, except for fixing the price above $23k, Bitcoin is moving towards the second stage of correction. The estimated targets for the asset will be the $21.4k level and deeper to the $20k area. Below $21k, investor sentiment could drop heavily, which could lead to a breakdown of the $20k round mark.
However, if the bullish sentiment persists, which will be visible on the main on-chain metrics, we will see active accumulation in the $20k–$21k area. Subsequently, this will allow Bitcoin to continue its upward movement towards the $24k–$25k levels.
