Bitcoin Price Weekly Outlook: Will Channel Support Floors Contain the Institutional Selloff?

Quick overview

Bitcoin (BTC/USD) is attempting a defensive closing this month at $73,502.00 as the main cryptocurrency consolidates by 0.27% toward the close. The leading crypto has been working its way out of a major downtrend channel on the H4 chart as tight accumulation by on-chain investors clashes with significant portfolio rebalancing from institutions as the end of the month closes out.

This Week’s Big Drivers

The Shocking $2.1B BlackRock ETF Drain

The market’s short-term liquidity was put under substantial stress due to sudden changes in the flow of the market’s leading capital asset. Tracking on-chain flows revealed that BlackRock’s IBIT fund has been dumping bitcoin valued at $2.1B over the past ten days and this resulted in a significant hedging move that overcame constant purchases from smaller individual asset managers.

The Kevin Warsh Macro Narrative

Institutional capital has been priced for an aggressive macro tightening after the swearing-in of the new Federal Reserve Chairman Kevin Warsh. With the CPI holding stubborn at 3.8% for April while core prints were at 4.1%, market expectations for near-term rate cuts have been crushed leaving a strong bid underneath the US Dollar Index.

The $1.2B Tether Burn

Extreme fear was displayed on-chain on May 31 when the USDT issuer burned $1.2B of its USDT supply in a 24-hour time frame. Burning tens of millions of dollars worth of stablecoins typically reflects a shift in dominance among the stablecoin class that usually precedes further broad crypto liquidation events.

Bitcoin Price Outlook

The H4 view is displaying a highly structured downtrend that is continuing. Bitcoin has been trapped in a long descending parallel channel after selling off the previous multi-week high of $83,350.00 with the asset printing a very orderly string of lower highs.

We are currently coiling just below the $73,889.00 0.236 Fibonacci retracement level on the H4 chart. Sellers have been selling the upper boundary near $74,100 to $74,200 but we are seeing responsive bids at the $73,301.00 shelf with the recent candlesticks printing lower wicks at that level.

The 14R is currently reading at 40.68 meaning that the asset is not oversold and it can still have more room to go down if support breaks.

• Resistance: $73,889.00 (0.236 Fib), $74,110 to $74,200 (Channel), and $74,672.
• Support: $73,301 (Immediate horizontal), $72,623.00 (0 Fib), and $70,000 (Psychology).

Trade Plan

A clear trend-following setup is forming as Bitcoin coiled towards the bottom end of its near-term range.

• Sell stop to be executed on a 4-hour candlestick close below $73,301.
• Targets at $72,623 (T1) and $71,500 (T2)
• Stop placed above the Fibonacci pivot at $73,889.00.

The Bottom Line

The Bitcoin price outlook suggests that Bitcoin is in the middle of a heavy liquidity adjustment phase that is testing its mid-term trend prior to the upcoming FOMC meeting cycle in June. While long-term supporters have the supply-side scarcity of the Halving as their go-to argument, the price of the asset is currently being dictated by the momentum algorithms.

We expect higher volatility around the opening gaps in the first half of this week so we may be waiting for confirmation on volume before we start opening our positions.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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