Bitcoin is back below $20,000 and seems on track to re-test the bottom of its current range. The cryptocurrency was showing signs of recovery, but it was rejected near the critical resistance zone at around $22,000.
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At the time of writing, BTC’s price trades at $19,800 with a 3% and 2% loss in the last 24 hours and 7 days respectively.
In a recent market update, trading desk QCP Capital addressed the factor that might contribute to BTC’s price moving sideways for the foreseeable future. These included the upcoming Mt. Gox redemptions, and global inflation.
On the probability of the Mt. Gox repayments negatively impacting Bitcoin and the crypto market, QCP Capital wrote:
It is impossible to be certain about the exact impact, given the numerous cross-arguments and theories surrounding the release. Our main takeaway is that there is a high chance of BTC supply flooding the market soon.
In the best-case scenario, Bitcoin will face downside pressure allowing Ethereum and other altcoins to gain some breathing room. The sector might record some gains after an extended period of increased Bitcoin dominance.
The worst-case scenario is additional selling pressure for Bitcoin, as QCP Capital said, and the entire crypto market pushing prices to their yearly lows or deeper into bear market territory. A lot depends on Mt. Gox’s unlock schedule, and if the victims will succumb to market uncertainty or wait for BTC’s price to reclaim previous highs.
QCP Capital made the following prediction on what could be in store for Bitcoin in the short term.
We’re not outrightly bearish at these spot levels but we think the sudden demand for call structures might have pushed the risk reversal levels a bit too much to the topside. Our base case continues to be sideways trading with the risk of sharp dips and upside capped (…).
What Could Push Bitcoin Back Into The Green
Tomorrow, the U.S. will publish a new Consumer Price Index (CPI) print. After an aggressive shift in monetary policy from the U.S. Federal Reserve (Fed), market participants expect a decline in this metric.
If the CPI print signals a decline in inflation, the crypto market could see some relief. $18,600 and $22,000 will continue to operate as major support and resistance levels.
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In addition, analyst Ali Martinez indicated that Bitcoin is sitting at an “important demand wall”. There are 570,000 addresses that purchased BTC around its current levels, to the upside $20,900 is the next level to watch in case of bullish momentum, as seen in the chart below.
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