After a staggering 4% drop on Monday, Bitcoin saw a retracement on Wednesday. In the previous analysis it was highlighted this movement is to be expected due to the price falling to an area of buying orders. A thumbs up to the ones that followed.
A scary 3.5% wick to the downside was also recorded in the price but that movement was quickly recovered by the remaining buying orders that were placed around $26 800.
With the local low swept quickly, where will Bitcoin go now? Will we be seeing a bigger replacement or further pain is expected? Let’s dive in.
BITCOIN
During Monday BTC moved up to the area of Minor Resistance only to go back to the levels where bulls have set their buying orders. The move down can be considered as a bull trap that has liquidated the long positions.
Trading activity in the spot market (highest tier of the financial market for immediate delivery of assets) has decreased by 50% in comparison to the previous three-month period. This suggests a significant decline in trading activity and potentially a decrease in overall market liquidity. Periods of low volatility in the market often lead to sudden market activity, as there are less orders to be swept either ways.
This can be interpret as a sign of caution and we will most likely see larger spikes in the price of BTC. Having that in mind, there are still valid buying orders from bulls positioned between $26 700 – $26 500. Losing it means we will be seeing our next support at sub $25 000 levels but it is highly unlikely to break that level down for the current market situation.
The next Major Resistance area is still valid $28 900 – $29 400. However, will be looking forward to seeing sideways movement with significant volatility before reaching the zone. Overall, trading when there is less trading activity can lead to great losses, as spikes like the ones on Wednesday can trigger your stop loss before going the other direction in a matter of minutes.
FUNDAMENTAL
Besides BTC falling to an area of buying orders, the other reason to see a move up was the CPI data that was released on Wednesday.
What is CPI data?
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas.
The release of the U.S. Consumer Price Index (CPI) data exposes the market to potential fluctuations in response to the numbers provided in the report. That is why it is not preferable to open trades in the days when fundamental news are provided.
The U.S. CPI increased by 4.9% year-over-year, slightly lower than the estimated 5%. Meanwhile, the U.S. Core CPI, which excludes volatile components such as food and energy prices, increased by 5.5% year-over-year, in line with the estimated 5.5%. These figures suggest that there has been a significant increase in the cost of living in the U.S.
BTC is often seen as a potential hedge against inflation, as its supply is limited and its value is not tied to any particular government or central bank. The higher-than-expected CPI data may have caused some investors to turn to BTC as a potential hedge against the potential erosion of the purchasing power of fiat currencies.
SOLANA
SOL has been more volatile than other top currencies in the past few days and especially on the day we saw a retracement in the market. The price reached the Minor Resistance zone but essentially has been rejected from that level since.
Similarly to BTC, sideways movement for SOL is expected as quite the majority of the available orders on the market were swept today.
The Minor Resistance zone is still valid and it is based between $21.22 – $21.46. Will be looking to see a retest of lower levels before battling the area.
The bulls are still defending the price between $19.83 – $19.31 with existing buying orders. Will not be expecting to see SOL breaking lower but any position placed in the market right now can be considered vulnerable to sudden volatility. It is desired to stay out until clear levels are touched.
