Bitcoin bulls encounter resistance, sideways consolidation continues at $28,000

After breaking through $28,000 in late March, Bitcoin has risen about 70% year-to-date, and the total market value of cryptocurrencies has climbed to its highest level since June last year, which has triggered calls for a mini-bull market in the crypto community. However, the market rally has weakened in recent days. According to Bitpush terminal data, as of press time, Bitcoin's 24-hour volatility is less than 2%, and the trading price is hovering around $28,200.

Judging from historical data, April is a good month for BTC. According to Matrixport data, Bitcoin has achieved positive returns in this month six times in the past 10 years, with an average return of 17%.

Fear of corruption index points to greed

It’s hard to guess whether Bitcoin will continue to rise or fall, but the Crypto Fear and Greed Index can give us a glimpse into trader sentiment.

Alternative data shows that crypto investors have become more "greedy" this year, but there are still doubts about the sustainability of the current Bitcoin momentum. Investors' risk appetite is currently 62, up 30% from a month ago and more than doubled since January 1.

Values ​​above 50 indicate moderate greed in the market, and 100 suggests extreme greed, which is often seen as a sell indicator. Values ​​below 50 and zero indicate fear, which is often seen as a buying opportunity.

The index's annual peak was 68 in late March, days after the collapse of Silicon Valley Bank.

The Fear and Greed Index indicator takes into account cryptocurrency market volume, volatility, social media sentiment, token dominance, and Google search trends. These indicators act as market thermometers and can be both leading and lagging indicators, so their accuracy is difficult to quantify.

Ilya Volkov, CEO of Web3 company YouHodler, said in his tweet that the cooling of "greed" sentiment could provide room for more upward momentum. "On-chain data indicators show that this trend is likely to continue for some time, crypto derivatives trading volumes are also growing, and open interest in crypto options is at its peak," Volkov said.

But analysts at crypto exchange Bitfinex took a different view, warning in their April report that the market is in a state of transition.

“As Bitcoin’s non-zero balance addresses reach new highs, on-chain metrics suggest a need for caution,” the analysts wrote. “Despite the influx of new market entrants, the sustainability of this rapidly growing non-zero balance and Bitcoin’s narrow range-bound phenomenon remains uncertain.”

Bad news for the economy equals good news for risky assets?

There have also been changes in the macro-environment. Recently, several member countries of the Organization of the Petroleum Exporting Countries (OPEC+) announced "voluntary" cuts in oil production, with a total reduction of more than 1.6 million barrels per day, which will last from May this year to the end of 2023. In addition, weak US economic data has put pressure on the US dollar.

The U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday showed that job openings fell by 632,000 to 9.9 million in February, the lowest level since May 2021 and well below the FactSet estimate of 10.4 million, suggesting that the persistently hot job market may be cooling.

Weak employment is a necessary precursor to the Federal Reserve pausing its pace of rate hikes, and Tuesday’s data fits the current narrative that bad news for the economy equals good news for risk asset prices.

Trading firm QCP Capital said in its latest market update that both the U.S. dollar and bond yields are drivers of BTC, and more weak U.S. data further solidified the recession narrative, with analysts saying: “After many false dawns, we believe this will indeed be a lasting dawn.”

QCP Capital went on to note that while Bitcoin has the potential to benefit from this disruption, as it did during last month’s banking crisis, its status as a safe haven during a recession remains “unproven.”

The report stated: “If the Fed acts quickly in a recession, as they did during the banking crisis last month, we expect BTC to fall again. However, in a stagflationary environment, if the Fed believes that they cannot cut rates until inflation reaches its target again, will BTC follow risk assets lower? This remains to be seen. While BTC is unproven as an inflation hedge, it is definitely a hedge for high beta assets at the moment.”

Technical charts suggest sideways trading

Data provided by TradingView shows that Bitcoin bulls encountered strong resistance at $28,500, resulting in a pullback to the $27,900 support level, where BTC has been stable since March 20.

Jim Wyckoff, senior technical analyst at Kitco, said that the weak momentum in the crypto market is reflected in the futures market, and the price of April Bitcoin futures "weakened slightly during the U.S. stock trading session this week after hitting a contract high last week." Laevitas.ch data shows that since March 30, the Bitcoin futures premium has been hovering around the neutral to bearish threshold, indicating that professional traders are still reluctant to turn bullish despite BTC prices remaining near $28,000.

“BTC bulls still have the solid overall near-term technical advantage as the price uptrend has paused but remains intact on the daily bar chart. The path of least resistance for prices remains sideways to the upside,” Wyckoff said.

Eight Global analysts highlighted the sideways trend in the crypto market in a market update, saying: “Not much has changed on the Bitcoin chart since last week.”

“It would be bullish if the weekly 8EMA [exponential moving average] breaks above price here in a week or two, rather than testing it downside, thus providing it with a platform to bounce off resistance,” the analyst said.

Analysts at Eight Global advise investors to remain cautious, suggesting “watching the $28,500-$29,000 resistance, $27,000 (channel median), and $26,700 (channel bottom) support levels to predict the next move.”