Bitcoin bulls failed to prevent fresh losses, with BTC price giving up its previous strength as opportunistic whales taking advantage of liquidity manipulated the stage.
Bitcoin fell back below $27,000 on May 19 as analysis showed that large transactions were weighing on prices.
The Specter of Inflation Haunts Crypto Markets
Data from Cointelegraph Markets Pro and TradingView show BTC/USD hitting a low of $26,380 on Bitstamp.
A modest rebound then brought the pair into the familiar range seen a few days ago, which remains in focus ahead of the final opening of the week on Wall Street.
The overnight decline came as expectations grew for a June rate hike by the Federal Reserve.
That's thanks to lower jobless claims data this week, which saw Federal Reserve officials increase their hawkish tone.
“On the one hand, inflation is too high, and we haven’t made enough progress in reducing inflation,” board member Philip Jefferson said in a speech at the 2023 International Insurance Forum in Washington, DC.
“On the other hand, GDP has slowed sharply this year, and while the impact on the labor market has been modest so far, demand is clearly starting to feel the effects of interest rates being slightly higher by 5 percentage points than they were a year ago.”
According to CME Group's FedWatch Tool, the probability that the Federal Reserve will pause its rate hike cycle next month once exceeded 95%, but on that day it was only 62%.
In a detailed breakdown of the incident, monitoring resource material indicators showed that owners who bid and demand liquidity to trade manipulated BTC price behavior in a short period of time.
"After trading sideways, markets start pricing in the possibility of another rate hike as the morning's unemployment report and#FEDspokesperson sets the tone for the conversation ahead of#JPowscheduled for Friday," one Twitter comment summarized.
“As price began to fall, the bid ladder was bumpy and price moved to previous support ~$26.5k but a sell wall was quickly set up to keep price in check.”
Material Indicators noted that BTC/USD retested the 100-day moving average (MA) — the third time in the past seven days.
"About 90 minutes later, after a few nibbles at the sales wall, the roof was pulled off. Shortly afterwards, a new $36 million bid was placed under local support and the meltdown began," it added.
The analysis concluded that in addition to the 100-day MA, the 200-week MA at $26,100 could also form a downside support area.
Material Indicators referenced Federal Reserve Chairman Jerome Powell’s May 19 speech, suggesting that further hawkish rhetoric on inflation would add pressure on risk asset prices.
Traders in “wait and see” mode
Therefore, traders maintain potential bearish targets that are concentrated in the broad area around $25,000.
One of them is Michaël van de Poppe, founder and CEO of trading firm Eight, who identified $27,000 as a critical support level that is currently absent from the charts.
"If we can break $27,500 I'll be long, if we close below $26,600 I'll be short. No trades in this tight range," popular trader Crypto Tony added in a partial comment on Twitter.
Meanwhile, trading suite Decentrader’s data on shorts vs longs is not encouraging, believing that prices need to turn around to have a chance of recovering higher levels.
“The long/short ratio is currently above 2, which is very high. This usually needs to be resolved and head lower before things start to turn bullish,” it acknowledged.