If you read our article last week, we mentioned that a drop in price might be expected soon. It came much sooner than we all expected, with Bitcoin sliding down to the lower $27,000 levels. The reason for this are investors eyeing debt ceiling negotiations. But, is the drop a rally relief or a bullish reversal? Everyone thinks—and we all hope—that it’s the latter.
But, things might get darker before they turn bright. The daily RSI and price action show potential for more downside. Currently, things seem locked in a bearish pattern, but luckily, experts believe it’ll be short lived. What needs to happen is a daily close over $27,500 which shouldn’t be too hard to hit this week or the following one.
Has the Correction Begun?
There’s been a Bitcoin price break down on May 11 and the events that unfolded confirmed its validity. Technical analysis of Bitcoin’s movement in the past few weeks have revealed a bearish pattern we’ve seen many times before. It starts with a high point, follows it up with an even higher peak, and then another peak similar to the first one. A price drop then follows which introduces a steep decline.
If all the events so far are true, more downside is expected. The daily relative strength index seems to support this opinion. On the positive side, readings above 50 on the RSI indicate that bulls still have the advantage, and everyone’s hoping that’s the case.
A major reason for the Bitcoin price drop is the current macroeconomic situation in the USA. Treasury Secretary Janet Yellen has warned everyone that the US will breach the debt limit on June 1 which could result in recession. The current macroeconomic situation is conductive for increased Bitcoin adoption. The debt ceiling being raised bodes well for risk assets as market participants move to secure their wealth.
Everything depends on how the negotiations proceed. They highlight the weaknesses and strengths of the financial system, but also create doubts over long-term sustainability. This could lead to demand for alternatives such as cryptocurrencies.
What Happens Next?
While we’re in a short-term bearish market, the overall potential going forward looks great. The current bearish count according to the Elliott Wave theory suggest that Bitcoin is in the fourth of a five-wave upward movement. If that’s the case, the leading cryptocurrency on the market is locked in an A-B-C correction.
If the price breakdown follows the pattern, it could result in further price drops in the $23,500 range. That might not happen if the bullish pattern takes place, which shows an upward trend toward $30,000 and up. So overall, even if the price drops due to the macroeconomic situation while we wait for the debt ceiling reports, Bitcoin could be golden in the long term.
We’re all rooting for the upward price trend to continue. So far, 2023 has been a great year for cryptocurrencies, and that might continue down the road.