Crypto prices have been suppressed over the past six weeks, frustrating the efforts by Bitcoin bulls to push and sustain the big crypto above $30,000. Apart from the bearish technical structure, derivatives metrics show that buyers will have a hard time breaking the downtrend, as the price action on the shorter timeframe provides a negative outlook for Bitcoin.
Bitcoin is trading at $26,042 with a bullish bias, down 1.66% on the day and 1.93% over the last week. This shows that BTC’s price is generally unchanged as overhead pressure heats up.
BTC/USD Four-hour Chart
Notice that the descending triangle chart formation on the four-hour chart initiated on May 13 could last for a few more days, indicating that an eventual break to the downside would be detrimental for the bulls.
For this to happen, the price of the pioneer cryptocurrency must breach the support at $26,700, embraced by the triangle’s support line. This would set BTC on a freefall to reach the bearish target of the governing chart pattern at $25,755. This would represent a 4% drop from the current price.
This bearish outlook was supported by the position of the major SMAs above the price. Selling pressure from these resistance zones is likely to further suppress Bitcoin. In addition, the Moving Average Convergence Divergence (MACD) indicator and the Relative Strength Index (RSI) were both positioned in the negative region, reinforcing the downward outlook for BTC.
Also supporting the bearish thesis for Bitcoin was derivatives data on perpetual contracts. These are also known as inverse swaps and have an embedded rate that is usually charged every eight hours.
When this rate is positive, it indicates that buyers are demanding more leverage. On the other hand, a negative funding rate when shorts sellers require additional leverage.
Perpetual futures accumulated 7-day funding rate on May 19
The figure above shows that the seven-day funding rate for Bitcoin was in the red, indicating more demand from shorts (sellers) using perpetual futures contracts.
In addition, there’s the impending U.S. debt ceiling standoff, as the U.S. Treasury is quickly running out of cash.
Even if the majority of investors believe that the Biden administration will be able to strike a deal before the effective default of its debt, no one can exclude the possibility of a government shutdown and subsequent default.
If this happens, all risk-on assets are likely to enter a prolonged downtrend including cryptocurrencies.
The Flipside
On the other hand, the RSI was turning up, a suggestion that buyers were re-entering the market. The MACD had also begun tipping upward, an indication that the market still favored the upside.
As such, the largest cryptocurrency by market capitalization could turn up from the current levels to confront resistance from the 50 SMA at $27, 078. Shattering this barrier would bolster BTC above the descending tenline of the triangle at $27,200 to tag the 100 SMA at $27,455.
A rise higher would see BTC reach the 200 SMA above the $28,000 psychological higher or the $28,400 range high.
