Bitcoin Drops Below $70K as Macro Pressure Builds
Break of $70K support opens path toward $65K zone.
After a good start to the week, Bitcoin and the broader crypto market pared gains and dropped below key support levels, weakened by macro headwinds. The market sentiment switched to risk-off once again, following above-expectations U.S. inflation data, a hawkish Fed, and the ongoing conflict in the Middle East.
On Wednesday, the U.S. Core Producer Price Index (PPI), which is a measure of inflation, exceeded analysts’ expectations, growing 0.5% month-over-month. The yearly figure for the Core PPI rose to 3.9%. This showed that inflation is stickier than previously anticipated and will most likely keep interest rates higher for longer, which is detrimental for risk assets such as Bitcoin and crypto in general.
The Federal Reserve kept the interest rate unchanged, which was widely anticipated, but during the press conference, Fed Chair Powell suggested a data-driven approach. Since inflation is above the Fed’s 2% target, we can expect a restrictive monetary policy going forward. At the time of writing, the chances of a rate cut in June are just 6.2%, according to the CME FedWatch tool. To put things into perspective, a month ago, the chances of a June rate cut were 48.1%.
Adding to the risk-off sentiment is the Middle East conflict and the energy shock it created. Oil is trading above $100, putting more inflationary pressures on the U.S. economy. The latest oil price surge came after Iran attacked a major gas hub in Qatar and Israel retaliated. President Trump called for a de-escalation of attacks on energy targets in the Middle East.
Chart Analysis – BTC/USD
Bitcoin bulls could not defend the support zone at $70K, and on Thursday, the price slipped below the level, opening the door for a deeper drop, possibly into the $65K area. Currently, BTC is trading near the middle Bollinger band, with the lower band sitting around $65K. The price touched the upper band twice without traveling to the lower one, which increases the probability of a visit to the $65K territory.
The RSI is trading in the middle of its range, without signs of divergence; in other words, it’s neutral, without providing a clear signal. However, volume on the current drop is lower than it was during the latest climbs, which suggests that buying interest prevails. On the other hand, the drop triggered liquidations, which could cause a cascade effect, dragging BTC lower.
If the bulls manage to retake the $70K barrier, the next step would be a test of the long-term bearish trend line drawn from the ATH at $126K. However, for that to happen, Bitcoin would need a relatively strong catalyst.
