Bitcoin price revisits crucial support level as concerns over Fed interest rate increase impact $27K.

On May 19, Bitcoin (BTC) fell back below $27,000 as analyses indicated that large-volume trades were exerting downward pressure on the price.

BTC/USD 1-day candle chart on Bitstamp. Source: TradingView

Inflation concerns affect crypto markets

Data from Cointelegraph Markets Pro and TradingView revealed that BTC/USD reached a low of $26,380 on Bitstamp.

A slight rebound then brought the pair back to a range reminiscent of several days earlier, remaining in focus ahead of the final Wall Street opening of the week.

The overnight decline was attributed to rising market expectations regarding an interest rate increase by the United States Federal Reserve in June.

This shift was influenced by low jobless claims data for the week, alongside Fed officials adopting a more hawkish stance.

"On one hand, inflation remains elevated, and we have not yet made adequate progress in reducing it," stated board member Philip Jefferson during a speech at the 2023 International Insurance Forum in Washington, D.C.

"On the other hand, GDP has significantly slowed this year, and while the impact has been muted in the labor market thus far, demand is clearly beginning to feel the effects of interest rates that are 5 percentage points higher than they were just over a year ago."

As per CME Group’s FedWatch Tool, the likelihood of the Fed pausing its rate hike cycle next month, which had previously exceeded 95%, dropped to just 62% on that day.

Fed target rate probabilities chart. Source: CME Group

In a comprehensive analysis of the situation, monitoring resource Material Indicators indicated that liquidity providers were executing trades to influence BTC price movements over short timeframes.

“After moving sideways, markets began to factor in the possibility of another rate hike as the morning’s Jobless Report and #FED speakers set the tone for that discussion ahead of #JPow’s scheduled appearance on Friday,” a portion of Twitter commentary summarized.

“As the price started to decline, a series of bids was removed, and the price fell to previous support around $26.5k, but a sell wall was quickly established to suppress the price.”

BTC/USD order book data (Binance). Source: Material Indicators/ Twitter

Material Indicators noted that BTC/USD conducted a retest of the 100-day moving average (MA) — marking its third such occurrence in the past week.

“After approximately 90 minutes and a few attempts at the sell wall, the ceiling was breached. Shortly thereafter, a new $36M block of bids was placed below local support, initiating a price increase,” it added.

Alongside the 100-day MA, the 200-week MA at $26,100, the analysis concluded, could also serve as a potential support zone moving forward.

BTC/USD 1-hour candle chart (Bitstamp) with 100-day, 200-week MA. Source: TradingView

Material Indicators referenced the May 19 appearance by Fed Chair Jerome Powell, suggesting that any further hawkish remarks regarding inflation could increase pressure on risk asset prices.

Traders in “wait and see” mode

Traders thus maintained potential bearish targets, focusing on a broad area around $25,000.

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Michaël van de Poppe, founder and CEO of trading firm Eight, was among them, identifying $27,000 as the critical support level now missing from the chart.

Wanted #Bitcoin to hold above $27,000-27,200.
Didn’t happen, stopped out on my longs and in the waiting game now.
Reclaim that range, we’ll try again, or now we’ll be waiting for $26,400 sweep and/or $25,000.

— Michaël van de Poppe (@CryptoMichNL) May 18, 2023

"I am looking for a long if we can break above $27,500, or a short if we close below $26,600. No trade in between this tight range," popular trader Crypto Tony remarked in part of Twitter comments.

BTC/USD annotated chart. Source: Crypto Tony/ Twitter

Trading suite Decentrader, meanwhile, highlighted lackluster figures regarding shorts versus longs, asserting that a shift was necessary for prices to have a chance at reclaiming higher levels.

"Long/Short ratio is currently above 2 which is very high. This typically needs to resolve and move lower before conditions start appearing bullish," it acknowledged.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.