With warmer than expected economic data released in February, inflation uncertainty has increased and the US stock market is now at a crucial crossroads. Despite growing investor concerns, the economy is showing signs of resilience that could help protect Bitcoin against a major downside. Although Bitcoin investors are advised to remain cautious until further economic data releases and the US Federal Reserve meeting in March, specific indicators suggest that the worst-case scenario is still in play regarding new lows in the market. BTC.
Bitcoin’s Sharp Drop Leaves Investors Desperate
Bitcoin (BTC)’s decline on Friday was initiated by concerns surrounding crypto-friendly bank Silvergate (SI), causing bullish leverage to be removed from the futures market. Data from Glassnode shows that during Asian hours, exchanges liquidated long or bull Bitcoin futures, which stood at over $62 million, the largest sum since August. Additionally, there were short liquidations worth just over $500,000.
Bitcoin investors who are still reeling from recent cryptocurrency company failures and banking issues may encounter another potential problem: a rally in the US dollar. Currently, there is a widely held belief that the appreciation of the US Dollar against other major global currencies, as indicated by the DXY Index, will have a negative effect on Bitcoin.
On March 3, on-chain data from crypto analytics platform IntoTheBlock revealed that Bitcoin had fallen below an important demand zone at $23,000. This decline has resulted in strong downward momentum, and Bitcoin could potentially retest levels below $20,000. Despite this, BTC still has a chance to come back if it breaks above the $23,700 barrier.
What awaits the BTC price next?
Bitcoin price just hit its lowest level in two weeks, creating a difficult situation for a bullish reversal. An extension of the bearish rally will further weaken investor sentiment and result in significant losses as buyers previously opened massive long positions near the $24,000 level.
At the time of writing, Bitcoin is trading at $22.4,000, down over 3.4% in the past 24 hours. BTC price recently fell below its crucial $22.5000 support level and aims to trade below its 0.31 Fib levels in the coming hours. However, there is still hope for investors as positive news near the $22,000 level will prevent Bitcoin from falling to the $20,000 level.
A break above the SMA-200 trendline at $23.2000 will again send the asset to $25,000, from which a smooth rally to $28,000 can be seen.