With the outbreak of a new conflict in the Middle East, Bitcoin (BTC) investors have become spectators in the current bear market. Many of them have indeed sold some of their Bitcoins out of fear of the consequences of the conflict, resulting in the cryptocurrency’s price drop.
This move has caused BTC to find support at $27,000 this week, sending fear signals throughout the market. In addition, inflation data in the United States shows that price increases remain strong. As a result, many investors have started to fear that Bitcoin may drop to $20,000.
US Consumer Price Index (CPI) data shows that inflation remained unchanged at 3.7%. However, the market expected the CPI to come in at 3.6%. In other words, the price of goods and services increased at a higher rate than expected for September. This increase has raised the risks of the central bank (Fed) raising interest rates, which could harm risk assets.
Bitcoin and the cryptocurrency market have dropped after the CPI data was released, but the largest cryptocurrency seems to have held support at $26,500. As of Friday (13), at the time of writing, the price of Bitcoin is up 0.5%, opening the day at $26,859.
According to data from the CryptoQuant platform, there was a significant increase in the number of deposits, withdrawals, and transactions with BTC in May, mainly due to enthusiasm surrounding the Ordinals. However, network data shows a substantial decrease on September 19.
The decline implies that network activity has decreased, likely due to a decrease in new investment entering the market. As a result, there has been a decrease in liquidity and, ultimately, a reduction in price volatility. But this has also caused BTC to lack the strength to generate new highs.
Whales and institutional investors may also be the cause of this shift, as they have not made significant moves in recent months. Without significant Bitcoin transfers, “the chances of a recovery in the near future are low,” the company said.
However, CryptoQuant assures investors that the situation is not as terrible as it may seem, considering that both the hash rate and mining difficulty have risen, suggesting that the network fundamentals are healthy.
Buyers are pushing for a recovery. The price of Bitcoin has started to form a positive daily candle, indicating that buyers are gaining strength. The immediate support of $26,500 is holding. However, BTC is relatively well-positioned to recover and return to $30,000, as long as the support at $26,500 remains intact.
The Relative Strength Index (RSI) is below the average line in the neutral area but shows signs of recovery towards the “overbought” region. The uptrend would attract more buyers seeking exposure to BTC and ultimately help regain levels of $27,000 and $28,000.
In this regard, the first resistance is at the 200-day Exponential Moving Average (EMA), which is at $27,015. Buyers should surpass all three moving averages, including the 21-day EMA and the 100-day EMA, to fully assert control and eventually surpass $30,000.