BTC Is Under the Hammer as the Fed and the SEC Deliver Headwinds

 Key Insights:

• On Wednesday, BTC slid by 3.09% to end the day at $25,146.
• SEC activity took a back seat mid-week, with the Federal Reserve sending the crypto market into the deep red.
• The technical indicators remain bearish, signaling a return to sub-$23,500.

On Wednesday, bitcoin (BTC) slid by 3.09%. Following a 0.06% loss on Tuesday, BTC ended the day at $25,146. Significantly, BTC revisited sub-$25,000 for the first time since March.

After a range-bound morning, BTC rose to a late afternoon high of $26,113 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $26,760, BTC fell to an early evening low of $24,838. BTC fell through the First Major Support Level (S1) at $25,643 and the Second Major Support Level (S2) at $25,338 to end the day at $25,146.

A Hawkish Fed Pause Sends BTC to sub-$25,000

It was a busy Wednesday session. US wholesale inflation numbers for May drew interest ahead of the heavily anticipated Fed interest rate decision and FOMC economic projections.

Wholesale inflation numbers were crypto-friendly. The US producer price index increased by 1.1% in May versus a forecasted 1.5% rise. In April, the index was up 2.3%. After the softer-than-expected US CPI report, the producer price index figures supported a more dovish Fed.

However, the Fed delivered a more hawkish rate pause, lifting the peak Fed Funds Rate from 5.1% to 5.6%. While more hawkish, the economic projections were also bullish.

The Fed expects unemployment to reach 4.1% by the end of 2023, down from the 4.5% projection in March. However, the Fed projected the Core PCE Price Index to sit at 3.9% by the end of the year versus 3.6% in March, suggesting the Fed could go higher than a peak rate of 5.6%.

While the hawkish pause sank BTC and the broader crypto market, the NASDAQ Composite Index ended the day up 0.39%. This morning, the NASDAQ mini was up 10 points, with investors eyeing another busy US economic calendar.

Crypto Community at Odds with the SEC and the Regulatory Landscape

Investor angst over the US regulatory landscape and the SEC added to the bearish mood. US lawmakers haven’t questioned the SEC charging Binance and Coinbase (COIN) in two days. While Binance was already facing lawmaker scrutiny, the uncertainty over whether cryptos are securities or commodities remains.

Investors hope the SEC v Ripple case could provide comfort. However, US lawmakers must pass legislation to roll out an appropriate framework and assign roles and responsibilities accordingly. Republican lawmakers, including Patrick McHenry and GT Thompson, will need members from the other side of the aisle to push through crypto regulations.

The Day Ahead

It is a busy Thursday. US retail sales, jobless claims, Philly Fed Manufacturing, and NY Empire State Manufacturing figures will move the dial.

While the US economic calendar will be a focal point, regulatory activity and updates from SEC cases against Ripple, Coinbase, and Binance will also influence.

Early in the Thursday session, economic indicators from China will set the tone. Fixed asset investment, industrial production, retail sales, and unemployment numbers will be in focus.

However, we expect the industrial production numbers to garner more interest. Economists forecast industrial production to increase by 3.8% year-over-year in May versus 5.6% in April. Weak numbers from China would weigh on riskier assets.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.06% to $25,132. A range-bound start to the day saw BTC fall from an opening price of $25,143 to a low of $25,101 before steadying.

BTC Technical Indicators

Resistance & Support Levels

BTC needs to move through the $25,366 pivot to target the First Major Resistance Level (R1) at $25,893 and the Wednesday high of $26,113. A return to $25,500 would signal an extended bullish session. The crypto news wires and US economic indicators 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 $26,641 and resistance at $27,000. The Third Major Resistance Level (R3) sits at $27,916.

Failure to move through the pivot would leave the First Major Support Level (S1) at $24,618 in play. However, barring a risk-off-fueled sell-off, BTC should avoid sub-$24,000. The Second Major Support Level (S2) at $24,091 should limit the downside. The Third Major Support Level (S3) sits at $22,816.

Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs sent bearish signals. BTC sat below the 50-day EMA ($26,085). 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 R1 ($25,893) and the 50-day EMA ($26,085) would support a breakout from the 100-day EMA ($26,395) to target R2 ($26,641). However, failure to move through the 50-day EMA ($26,085) would leave S1 ($24,618) in view. A move through the 50-day EMA would send a bullish signal.