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17.05.2023 11:28 AM
Bitcoin moves to retest $26.6k amid falling trading activity

By the middle of May, we can confidently say that the phrase "sell in May and go away" has fully justified itself. Throughout the month, we've been observing a downward corrective movement of BTC, and during pauses, consolidation and local price pullbacks of the cryptocurrency.

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We've seen a clear withdrawal of liquidity below the $26.6k level, which was mentioned earlier. We've also witnessed the price return above the $26.6k support zone, which is a bullish signal. However, a combination of fundamental and technical factors suggest that the structure of the upward trend could be disrupted soon.

Fundamental Factors

Another series of the saga with the global economy's recession has come to its conclusion. According to a BofA survey, market players anticipate a soft landing of the global economy in the next 12 months. The majority of respondents believe that a recession in the U.S. can be avoided, which was a positive signal for investors.

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Meanwhile, pessimistic sentiments continue to dominate within the crypto market, accompanied by a gradual decrease in trading activity. It is reported that May 2023 may become the worst month in terms of trading volumes on centralized exchanges since October 2020.

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The average commission sizes in the Bitcoin network have also returned to optimal values. On one hand, this confirms the low trading activity and interest in the cryptocurrency. On the other hand, it will allow reducing the cost of mining BTC, leading to more active actions from miners.

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Trading volumes and network activity in the Bitcoin market have also dropped to yearly lows. All these facts indicate a significant decrease in investment activity and bearish sentiment regarding Bitcoin. However, in the near future, several events might occur that could change the balance of power in the crypto market.

A Volatile End to the Week

Tomorrow, global markets are expecting important economic statistics on the U.S. labor market. Recently, employment in the United States has begun to decline due to a worsening liquidity situation. If the number of unemployed continues to grow, it's quite possible that the Federal Reserve will adjust its policy, and we might expect a rate cut as early as this summer.

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We will learn about these and other plans of the Federal Reserve on Friday, when officials will share their thoughts on the current economic situation. First and foremost, the markets will be awaiting the department's further plans regarding the key rate. These events will trigger a volatility spike and may provoke sharp price movements in BTC.

BTC/USD Analysis

Meanwhile, Bitcoin has definitively completed the process of withdrawing liquidity below $26.6k. The asset made a sharp leap below $26k and swept all the supply in one go, after which it rebounded. Currently, there is a consolidation phase happening under the influence of bears, which is causing a price decline.

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Bulls are not allowed above $27.8k, while sellers continue their attempts to break the $26.6k level, which, at this stage, acts as a key support zone. As of May 17, the situation is under control, but there is a possibility of a bearish breakthrough at the $26.6k level. This event could significantly strengthen the bears' position and lead to further decline.

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With further decline, the structure of the upward trend is threatened, which originates near the $24.6k–$25k area. As of 08:00 UTC, technical metrics are flat, which is typical for periods of low trading and network activity. Therefore, the $26.6k support level is still standing, but the situation can change.

Conclusions

The main task for buyers this week will be to hold the $26.6k level. The level has held despite the pressure from sellers, but volatility spikes in the next few days could change the situation. Considering this, the $26.6k level is crucial for determining the future prospects of Bitcoin.

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