Bitcoin falls below $27,000 as the topping pattern completes

Liquidity providers are leaving the market

The release of CPI data reinforced the belief that the Federal Reserve could avoid raising interest rates in an effort to fight inflation. This can be beneficial for cryptocurrencies as they are sensitive to risk and usually experience lower demand when interest rates are high.

Bitcoin, however, fell below $27,000 as investors weighed news of reduced crypto trading businesses from two major US institutional liquidity providers. Bloomberg recently reported that Jane Street and Jump Crypto, two of the biggest crypto market makers, are backing out of crypto trading in the US due to the country’s regulators cracking down on the industry.

Larger price fluctuations due to reduced liquidity from major market players are now a risk. This lack of liquidity was further exacerbated by the closure of Silvergate and Signature Bank, which drove the two primary fiat ramps into the crypto market.

Bitcoin has not been able to surpass the $30,000 level since it hit it a month ago, and it has hovered between that threshold and the upper part of the $26,000 level.

Daily analysis

Source: www.tradingview.com

• The daily bitcoin time frame has charted a head and shoulders top.
• This is a reversal pattern and is bearish.
• BTCUSD has broken the neck to the underside, completing the pattern.
• The pattern’s downside target is $23,620.
• Bitcoin’s RSI is on the bearish side of 50.
• The longer it maintains this position, the greater the probability of the pattern target being hit.

Weekly analysis

Source: www.tradingview.com

• Despite the daily reversal pattern, the long-term weekly has charted a series of rising bottoms followed by rising tops.
• This indicates a primary uptrend.
• In this framework, if the daily head and shoulders target of $23,620 is reached, the pattern of rising roughs followed by rising tops will not have been disrupted.
• Thus, today’s daily weakness may be a corrective leg in the larger trend.
• In this regard, the weekly RSI is on the bullish side of 50 (green rectangle).
• The longer the RSI maintains this position, the greater the likelihood of bullish momentum supporting the long-term bitcoin price.

Summary

• CPI data suggests that the Fed may stop raising interest rates.
• This is beneficial for cryptocurrencies and bitcoin.
• However, two institutional liquidity providers have withdrawn from trading due to regulatory concerns.
• This can increase price fluctuations.
• The daily chart has a topping pattern.
• The pattern’s target is $23,620.
• This does not disturb the rising bottoms and tops of the primary trend.
• Thus, given the CPI data, the current weakness may be corrective.