BTC Bulls Eye a Return to $26,500 on Fed Pause Bets

Key Insights:

• On Tuesday, BTC gained by 0.06% to end the day at $25,948.
• Easing bets on a June Fed interest rate hike and the William Hinman speech-related docs failed to support a breakout amidst the SEC onslaught.
• The technical indicators remain bearish, signaling a return to sub-$25,000.

On Tuesday, bitcoin (BTC) rose by 0.06%. Following a 0.08% loss on Monday, BTC ended the day at $25,948. Significantly, BTC ended the day at sub-$26,000 for the fourth consecutive session.

After a bullish morning, BTC struck a midday high of $26,455 before hitting reverse. BTC broke through the First Major Resistance Level (R1) at $26,161 and the Second Major Resistance Level (R2) at $26,390.

However, the reversal saw BTC slide to a late afternoon low of $25,744. Steering clear of the First Major Support Level (S1) at $25,668, BTC found late support to end the day at $25,948.

NASDAQ Decoupling Continues Ahead of the Fed Policy Decision

It was a busy Tuesday session. The all-important US CPI Report delivered a BTC session high before the crypto market hit reverse.

In May, the US annual inflation rate softened from 4.9% to 4.0% versus a forecasted 4.1%. The core inflation rate eased from 5.5% to 5.3%.

According to the CME FedWatch Tool, bets on the Fed hiking rates by 25 basis points in June tumbled in response to the inflation numbers. The probability of a June 25-basis point interest rate hike fell from 20.9% to 4.6%, with the chances of a July 50-basis point interest rate hike falling from 14.0% to 2.9%.

However, the probability of a 25-basis point July hike increased from 59.9% to 60.9%, leading to the post-CPI Report reversal.

The NASDAQ Composite Index responded to Fed bets, rising by 0.83% on Tuesday, with the Dow and S&P 500 seeing gains of 0.43% and 0.69%, respectively.

Crypto Market Sentiment Wanes Despite Easing Fed Fear

The crypto news wires failed to provide support, despite the coverage of the infamous William Hinman speech-related documents linked to the SEC v Ripple case.

On Tuesday, the SEC also demonstrated its unwillingness to deliver regulatory clarity. Coinbase (COIN) Chief Legal Office Paul Grewal had this to say about the SEC response to the Coinbase petition for rulemaking,

“1) They repeat the fallacy that they haven’t made any decision on new crypto rules; 2) they refuse to commit to any deadline despite the Court’s explicit order; 3) they instead ‘anticipate’ making a ‘recommendation’ in 120 days and most importantly, 4) they ignore the clear statements of the Chair that confirm they have no intent to issue new rules, and instead conflate the evidence of a decision those statements provide with an argument that the statements are themselves a decision.”

The SEC’s lack of response relates to the Coinbase v SEC case and not last week’s SEC filing against Coinbase.

For the broader crypto market, the SEC stance demonstrates the issues crypto-related firms face and the risks associated with incorporating in a jurisdiction that lacks defined regulatory guidelines.

According to Cornerstone Research, SEC cryptocurrency-related enforcement actions increased by 50% to 30 enforcement actions in the calendar year of 2022. Significantly, as of the year-end of 2022, monetary penalties against digital-asset-related firms totaled approx. $2.61 billion, of which $242 million were settlements reached in 2022.

Binance will likely face similar challenges in the SEC v Binance case. A lengthy battle could leave the US crypto market in limbo without US lawmaker intervention.

The Day Ahead

It is a busy Wednesday. US wholesale inflation will draw interest before the main event of the week. After the softer US CPI Report, an easing in wholesale inflation should cut bets on a July Fed interest rate hike. However, the devil will be in the details. A hawkish pause and hints of a hard landing would weigh.

While the Fed will be the focal point, regulatory activity and updates from SEC cases against Ripple, Coinbase, and Binance will move the dial.

Bitcoin (BTC) Price Action

This morning, BTC was up 0.04% to $25,958. A range-bound start to the day saw BTC slip to an early low of $25,944 before rising to a high of $25,958.

BTC Technical Indicators

Resistance & Support Levels

BTC needs to move through the $26,049 pivot to target the First Major Resistance Level (R1) at $26,354 and the Tuesday high of $26,455. A return to $26,000 would signal an extended bullish session. The crypto news wires and the Fed 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 $26,760 and resistance at $27,000. The Third Major Resistance Level (R3) sits at $27,471.

Failure to move through the pivot would leave the First Major Support Level (S1) at $25,643 in play. However, barring a Fed-fueled sell-off, BTC should avoid sub-$25,000. The Second Major Support Level (S2) at $25,338 should limit the downside. The Third Major Support Level (S3) sits at $24,627.

Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs sent bearish signals. BTC sat below the 50-day EMA ($26,198). The 50-day EMA fell back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, sending bearish signals.

A move through the 50-day EMA ($26,198) would support a breakout from R1 ($26,354) and the 100-day EMA ($26,486) to give the bulls a run at R2 ($26,760) and the 200-day EMA ($26,861). However, failure to move through the 50-day EMA ($26,198) would leave S1 ($25,643) in view. A move through the 50-day EMA would send a bullish signal.