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Bitcoin breathes sigh of relief amid optimism over debt-ceiling resolution – Cryptocurrency News
May 18, 2023 2:28 pmVideo
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Bitcoin and major altcoins started this week on the front foot after a weekend of choppy trading, but digital assets remained way below the crucial levels conquered earlier in the year. Despite posting consecutive intraday gains, Bitcoin has repeatedly failed to surpass the $27,500 mark, hinting that its recent selloff could extend. However, some renewed optimism regarding the debt-ceiling negotiations on Thursday cheered up the mood in crypto markets, but is it enough to pause the downside correction?
Bitcoin under pressure
Bitcoin appears to be consolidating in the last few days amid a variety of diverging signals. Much of its 2023 rally was based on expectations that the Fed will eventually adopt a more accommodative monetary stance, but even if macro catalysts have been increasingly tilting towards this direction, crypto bulls have failed to push the price higher. The recent price weakness could be attributed to the regulatory crackdown observed in most major economies, yet this is not something new for the sector.
Another factor behind the recent pullback in crypto prices could be the surge in US Treasury yields as a result of the debt ceiling crisis. Generally, when yields move higher, risky assets such as stocks and cryptos become less attractive from a risk-return perspective, which ultimately weighs on their prices. Interestingly, the tech-heavy Nasdaq 100 remains unhindered, posting consecutive higher-highs in the past few daily sessions.
Therefore, we have entered a period where the strong positive correlation between tech stocks and cryptos is fading, but there is no clear catalyst behind this development. Is the king of cryptos ready to re-establish itself as an asset immune to macroeconomic swings?
Regulatory newsflow
The 2022 bear market cycle exposed several flaws and failures in cryptocurrency projects and business models, urging governments to adopt a clearer and stricter regulatory framework. Nevertheless, as major economies seek more control over the sector to prevent further systemic shocks, crypto prices react negatively to those developments.
In the US, the Securities and Exchange Commission (SEC) has taken a hard stance against crypto-related firms, with many crypto giants fleeing from the US and requesting licenses in more ‘crypto-friendly’ countries. In the absence of large and established crypto exchanges, investors would grapple with liquidity concerns, which in turn could cause more uncertainty and hurt prices.
In Europe, the EU is set to pass a comprehensive set of rules covering all aspects of crypto markets next Tuesday, making it the first major jurisdiction to adopt a clear stance against the developing sector. On the other hand, the UK seems to be heading in the opposite direction, with policymakers suggesting that they should impose the same rules on cryptos as they do on gambling.
Gloomy technical picture
Taking a technical look at BTCUSD, things are not looking that great after the price’s retreat to a fresh two-month low. Even though the king of cryptos posted a moderate rebound, it has been rangebound since then, appearing unable to generate a fresh higher high.
If the price moves to the upside, immediate resistance could be met at $27,988, which is the 38.2% Fibonacci retracement of the 48,226-15,479 downtrend. A violation of that region may set the stage for the 10-month high of 31,064.
On the flipside, bearish actions could send the price to test the $25,250 resistance, which could serve as support in the future. Failing to halt there, the bears could then target the 23.6% Fibo of $23,207.
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