BTC Bears Target $26,500 on US Debt Ceiling Woes and Fed Fear

Bob Mason
Published: May 24, 2023, 00:51 UTC

BTC was in the red this morning as investor focus returned to the US debt ceiling impasse and the Fed. Later today, the FOMC meeting minutes will influence.

BTC technical analysis - FX Empire

In this article:

Key Insights:

  • On Tuesday, BTC gained 1.39% to end the session at $27,243.
  • Investor jitters over a US default took a back seat on news of HK opening its doors to retail crypto trading from June 1, 2023.
  • The technical indicators are less bearish, signaling a run at $28,000.

On Tuesday, bitcoin (BTC) rose by 1.39%. Following a 0.41% gain on Monday, BTC ended the day at $27,243. Significantly, BTC revisited the $27,500 handle for the first time in five sessions.

A mixed start to the day saw BTC fall to a first-hour low of $26,829. Steering clear of the First Major Support Level (S1) at $26,567, BTC rose to a mid-morning high of $27,543. BTC broke through the First Major Resistance Level (R1) at $27,150 and briefly through the Second Major Resistance Level (R2) at $27,432 before easing back to end the day at $27,243.

Hong Kong Crypto News Mutes US Debt Ceiling Woes

Crypto news updates from Hong Kong and US economic indicators delivered BTC price support.

Hong Kong’s push to become a crypto hub gained momentum on Tuesday. The Hong Kong Securities and Futures Commission (HKSFC) announced that retail investors can trade crypto. According to the press release,

“Operators of virtual asset trading platforms who are prepared to comply with the SFC’s standards are welcome to apply for a license. Those who do not plan to do so should proceed to an orderly closure of their business in Hong Kong.”

The Guidelines for Virtual Asset Trading Platform Operators will become effective June 1.

Hong Kong’s move to become a crypto hub contrast with other jurisdictions, including the US, that have taken a more anti-crypto position.

US private sector PMI numbers also delivered support, with the all-important services sector seeing a pickup in sector activity. While the manufacturing PMI fell from 50.2 to 48.5, the services PMI increased from 53.4 to 54.5. Economists forecast both PMIs to decline to 50.0.

According to the CME FedWatch Tool, the probability of a 25-basis point Fed interest rate hike in June stood at 28.1%, up from 25.7% on Monday. The better-than-expected US service sector PMI numbers raised the chances of a June interest rate hike.

However, while the stats were upbeat, the US debt ceiling impasse weighed on the US equity markets.

The NASDAQ Composite Index and the S&P 500 saw losses of 1.26% and 1.12%, respectively, with the Dow falling by 0.69%.

NASDAQ Composite Index correlation.
NASDAQ – BTCUSD 240523 Hourly Chart

The Day Ahead

It is a relatively quiet Wednesday session. There are no US economic indicators to move the dial this afternoon. However, the FOMC meeting minutes will influence. The willingness to push interest rates higher to tame inflation and cool the labor market would test buyer appetite.

However, US debt ceiling talks will remain a focal point, with time running out for policymakers to prevent a US default and global financial market turmoil.

While the FOMC meeting minutes and debt ceiling talks will influence, investors should continue to track for SEC v Ripple updates and Binance and Coinbase (COIN)-related news.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.04% to $27,231. A range-bound start to the day saw BTC rise to an early high of $27,239 before falling to a low of $27,231.

BTC holds steady.
BTCUSD 240523 Daily Chart

BTC Technical Indicators

Resistance & Support Levels

R1 – $ 27,581 S1 – $ 26,867
R2 – $ 27,919 S2 – $ 26,491
R3 – $ 28,633 S3 – $ 25,777

BTC needs to avoid the $27,205 pivot to target the First Major Resistance Level (R1) at $27,581. A return to $27,500 would signal an extended bullish session. The FOMC meeting minutes and US debt ceiling-related news should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $27,919 and resistance at $28,000. The Third Major Resistance Level (R3) sits at $28,633.

A fall through the pivot would bring the First Major Support Level (S1) at $26,867 into play. However, barring a risk-off-fueled sell-off, BTC should avoid sub-$26,000. The Second Major Support Level (S2) at $26,491 should limit the downside. The Third Major Support Level (S3) sits at $25,777.

BTC resistance levels in play above the pivot.
BTCUSD 240523 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs are less bearish. BTC sat above the 50-day EMA ($27,102). The 50-day EMA closed in on the 100-day EMA, while the 100-day EMA flattened on the 200-day EMA, sending more bullish signals.

A move through the 100-day EMA ($27,334) would support a breakout from R1 ($27,581) to give the bulls a run at the 200-day EMA ($27,638) and R2 ($27,919). However, a fall through the 50-day EMA ($27,102) would bring S1 ($26,867) and sub-$26,500 into view. A fall through the 50-day EMA would be a bearish signal.

EMAs are turning bullish.
BTCUSD 240523 4 Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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