Bitcoin tumbles amid Binance “congestion” woes

After making a run towards the $30k mark, a possibility cited in our crypto article last week, Bitcoin has since slumped.

Prices of the world’s largest crypto have now sunken below a widely-watched technical indicator, its 50-day simple moving average (SMA).

The 50-day SMA had supported prices of the world’s largest crypto since April 24th, only to come undone by recent woes.

Monday’s 4.8% drop was spurred on a halt on Bitcoin withdrawals at the world’s largest crypto trading platform.

Binance shut down Bitcoin withdrawals, twice in the space of 12 hours, due to a “congestion issue”.

Bitcoin tumbles amid Binance “congestion” woes

 

From a technical perspective, at the time of writing, Bitcoin is testing support around the mid-$27,000 region, which had also supported prices late last month.

However, if the $27k psychologically-important line fails to hold, it’s a long way down to the $25k mark, which had offered notable resistance back in mid-February and mid-March.

Should the $27k support fail, Bitcoin bulls will be hoping the $25k region will turn from resistance to support to preserve its year-to-date gains, which currently stand at 67%.

 

Shifting our gaze back to the macroeconomic calendar …

The US inflation data due tomorrow (Wednesday, May 10th) is the marquee event of the week:

  • Economists predict that the headline CPI (consumer price index) grew by 5% in April 2023, compared to April 2022 (year-on-year).
    A 5% headline CPI for April would match March’s number, and still much higher than the Fed’s 2% inflation target.
     
  • As for the core CPI, which excludes the oft-volatile prices of food and energy, it’s forecasted to come in at 5.5% year-on-year, a tad lower than March’s 5.6%.

 

Ultimately, if these CPI prints exceed market expectations, that could prompt markets to pare back bets that the Fed will press pause on its rate hikes in June.

Such a shift in market expectations could be a further drag on Bitcoin prices, based on the thought that the Fed has to hike interest rates further to quell still-stubborn US inflation.

More rate hikes are intended to further drain liquidity out of global financial markets; and we know that greater liquidity is a great enabler of crypto gains.

Hence, the market narrative this week could be as follows: higher-than-expected inflation may prompt the Fed to hike again in June, which could dampen Bitcoin’s attempts to recover towards $30k.

 

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