Source: PaxForex Premium Analytics Portal, Fundamental Insight
After Bitcoin led the cryptocurrency market to fresh 2023 highs in April, bears regained control and pressured price action lower. While the sell-off has been comparatively small, spanning roughly 3,500 points, downside pressures from a technical and fundamental perspective continue to build. Two of the ongoing issues of Bitcoin, and why it is not a suitable remittance tool that can displace fiat currency while losing out to other cryptocurrencies in the sector, are high network fees and slow transaction times. Network congestion forced Binance, the largest and most liquid cryptocurrency exchange, to temporarily halt Bitcoin withdrawals. It resumed after a few hours with higher fees, as Bitcoin miners refused to process Binance transactions due to insufficient compensation.
The issuance of Ordinals, non-fungible assets on the Bitcoin network, and the BRC-20 token, the new fungible standard, added to network congestion, which spiked transaction fees. Bitcoin tried to capture the growth of the NFT sector, but it also attracted the meme coin frenzy, which is a long-term negative. While Ordinals are not exactly NFTs, they are the closest to them that Bitcoin offers. Users can link a satoshi, the smallest increment of a Bitcoin, where 100M satoshies equal one Bitcoin, to arbitrary content by submitting their desired content to the Bitcoin blockchain via inscription. While Ordinals can add an exciting opportunity for the Bitcoin network, it also creates an overload. The Bitcoin infrastructure functioned inefficiently before Ordinals and BRC-20, and adding more made the Bitcoin blockchain slower and more expensive, which could lead to more bleeding ahead and depress prices in the medium term.
The forecast for the BTC/USD remains bearish after this cryptocurrency pair recorded three lower highs. Adding to bearish pressures is the downward shifting Tenkan-sen, which completed a bearish crossover below the flat Kijun-sen. The Ichimoku Kinko Hyo Cloud ended its advance, and the Senkou Span A began to drift lower, which will narrow the Ichimoku Kinko Hyo Cloud and added to selling pressures. Traders should also monitor the CCI following its breakdown from extreme overbought territory followed by a bounce that resulted in a lower high, confirming the loss of bullishness. This technical indicator moved below zero and dipped into extreme oversold conditions. It may attempt a breakout, which is expected to result in another lower high before extending its slide with plenty of downside potential. Can bears continue to pressure the BTC/USD toward its next horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the BTC/USD remain inside the or breakdown below the 26,930 to 27,955 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 27,500
- Take Profit Zone: 23,255 – 24,195
- Stop Loss Level: 28,530
Should price action for the BTC/USD breakout above 27,955, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 28,530
- Take Profit Zone: 29,965 – 30,415
- Stop Loss Level: 27,955
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
