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Summary: Bitcoin prices briefly rose during the New York session on Wednesday but unexpectedly plunged $1,400, or 5%, to $26,985 near the end of the session. This short-term decline suggests that continued market demand remains subdued.

Fundamentals

According to CoinShares, investments in crypto funds fell by $54 million last week, the third consecutive week of outflows. Bitcoin investments fell by $32 million and Ethereum by $2 million, while inflows allowed shorting Bitcoin fell by a record $23 million.

According to a Goldman Sachs survey, the number of family offices "potentially interested" in cryptocurrencies has fallen from 45% to 12% by 2023. Cryptocurrency exchange Bittrex filed for bankruptcy after ceasing operations in the U.S. due to regulatory pressure. The default also applies to several of the exchange's subsidiaries. Brad Garlinghouse, Ripple Labs CEO, has advised cryptocurrency startups not to shop in the U.S. to avoid regulatory harassment.

Hong Kong authorities announced "tough" measures on cryptocurrency regulation. As of June 1, all exchanges will have to be licensed by the Securities and Futures Commission (SFC). The authorities will also introduce a mandatory licensing system for stablecoins by 2024.

The governor of the Central Bank of Ireland urged citizens to be skeptical about investing in cryptocurrencies, saying they are high-risk, dangerous, and "too much like a lottery".

Meanwhile, the sharp drop in Bitcoin prices has sparked rumors that U.S. government officials are backing the sale of previously confiscated Bitcoins. However, we also note that the drop was preceded by a rally, during which speculators may have built up liquidity for the subsequent sell-off.

This was the price sell-off triggered by yesterday's market fundamentals. And on the charts, the formation of a series of lower highs, consolidation below the 50-day SMA, and the break of the April low suggest that bears are in control. Either way, short-term price dynamics are becoming increasingly bearish.

Technical Analysis

Bitcoin prices struggled to break the $30,000 resistance barrier after testing the April 27 low and fell below the previous low of $26,985 level, forming a downward trending structure. It is also in line with our previous layout. (For more related information, please refer to our previous articles.)

In the 4-hour chart, the price is currently stalling after breaking below three key support levels at $29,200, $29,000, and $28,500, as well as the 100 SMA and 200 SMA, respectively.

In addition, the price is currently trading below a key contraction triangle, showing bearish signs, and could soon revert to yesterday's low of $26,985.

In the event of a downside breakout and a daily close below $27,000, the price could start to fall again to $26,000 or even $25,200 in the coming days.

Momentum indicators confirm our expectations. Specifically, the RSI is below the 50 neutral mark, the stochastic oscillator continues to turn down, while the MACD forms a death cross below the 0-axis.

On the bright side, the market now needs a new higher high to revive the bulls' hopes for a continued uptrend. The previous support near $28,200, which is now resistance, needs to be decisively broken by the bulls in order to test the first upward resistance level at $28,750 and near the 100 SMA.

A successful close above $28,750 could trigger another bullish wave. In the above scenario, the price could rise to the $30,000 level.

However, the current market is a bear market, and the path of least risk is to the downside. Any push higher in price could trigger an opportunity for bears to add to their positions. In terms of trading strategy, it's recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 27200

Target Price: 25200

Stop Loss: 29860

Valid Until: 2022-05-25 23:55:00

Support: 26985, 26000, 25200

Resistance: 28200, 28500, 29187