Global financial markets are worried about the potential fallout from a US debt default. Meanwhile, Bitcoin, the major cryptocurrency, remains stable, maintaining momentum around $27,000, creating ambiguity about its next steps amid turbulent economic times. As talks remain stalled on raising the US government debt ceiling to $31.4 trillion, stoking nervousness in financial markets, some analysts are dissenting from popular opinion. They warn that a potential deal could cause a downturn in the cryptocurrency market.
Bitcoin settles in a tightest price range
Glassnode, an on-chain analytics firm, recently reported a major lull in crypto market activity. Despite anticipated market swings, Bitcoin, the largest cryptocurrency by market capitalization, has maintained a remarkably consistent price range for several months.
The chart shows a 3.4% difference between the high and low prices in the week to May 21. This remarkable stability persists even amid lingering concerns about the strength of U.S. regional banks and the national debt ceiling.
When the debt ceiling is finally raised, the Treasury should rebuild its cash reserves by issuing more government bonds. This could potentially drain liquidity from the system and put upward pressure on bond yields. As increased issuance often leads to lower prices and higher yields, Bitcoin (BTC), which typically moves against bond yields, could be affected.
So while a deal could alleviate significant economic uncertainty, assets like Bitcoin, which have no connection to the tangible economy and rely heavily on fiat liquidity, may actually face challenges.
According to several commentators, Bitcoin attracted safe-haven investments during the March banking crisis, while other interest-rate-sensitive assets like tech stocks also prospered as traders anticipated the Federal Reserve’s early moves toward higher levels. rate reductions. Essentially, Bitcoin continues to be a risky asset primarily driven by liquidity.
What to expect from the BTC price next?
Bitcoin has seen limited price fluctuations in recent days. Typically, these restricted ranges are followed by an expansion of the range, resulting in pronounced trend movements. Glassnode observed that Bitcoin’s seven-day price range is similar to the situations in January 2023 and July 2020, two periods that were followed by significant market shifts.
The bears effectively protected the 20-day EMA, but failed to drive the price down to key support at $25,000, implying that the bulls take advantage of minor price declines. BTC price is currently trading at $26,800, down more than 0.21% in the last 24 hours.
As long as the price remains above the immediate support of $26,358, the bulls will strive to propel the price into the symmetrical triangle pattern. Success in this area could involve the market rejecting lower levels, potentially increasing the chances of a rally towards the resistance line, which again could pose a significant challenge for bulls.
Contrary to this scenario, if the price goes down and crosses the $26,358 mark, it would suggest an oversupply. This could then lead to a potential drop to the critical $25,500 level.