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07.02.2024 07:19 PM
What happens during Bitcoin consolidation, and how will it affect the cryptocurrency price?

Over the past one and a half weeks, Bitcoin has been within a narrow range of fluctuations between $40.5k and $43.3k, trapped between two key levels. During this period, the cryptocurrency has not undergone powerful price movements, which is a direct consequence of the recent decisions of the Federal Reserve and U.S. macroeconomic statistics. Despite low trading activity and minimal price movement, the BTC network is actively used for transactions.

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In addition, some processes are minimally reflected in price charts, but their impact will significantly increase in the near future. There is also a gradual narrowing of the already narrow range of fluctuations, which in the short term will lead to a spike in volatility and a shift in the price range in one direction. The scenarios for the price movement of BTC remain unchanged, as the forces of bulls and bears are roughly equal, and therefore, it is fundamental factors that can disrupt the balance of power.

Fundamental Factors

The Federal Reserve's monetary policy is one of the key factors influencing Bitcoin quotes. At the last meeting, the agency remained committed to its policy, stating that interest rates would not be lowered in the first half of 2024. A stable level of inflation, as well as a strong labor market and overall consumer activity, indicate that achieving the target of 2% for CPI will take more time than investors had hoped.

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Against this backdrop, the majority of investors and traders expect the Federal Reserve to leave the interest rate unchanged at the March meeting. However, markets are confident that monetary policy easing will occur in May, as indicated by CME FedWatch statistics. At the same time, BBG analysts are confident that the Federal Reserve will not ease the rate until June 2024. If the latter are correct, the markets can expect another stage of disappointment and a decrease in investment activity.

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Despite the pessimistic fundamental background, different categories of investors continue to accumulate BTC. It has been reported that the head of MicroStrategy, Michael Saylor, has acquired another 850 BTC at an average cost of $43,700. BlackRock is also keeping up and increasing its balance of BTC coins to 75,702 for spot ETF. Looknode analysts note that the number of wallets with a balance of 1,000+ BTC has been growing since January 22, indicating sustained interest in Bitcoin.

BTC/USD Analysis

As of February 6, Bitcoin attempted to settle above $43.4k; however, the price was subsequently rejected towards the psychological round mark. It is worth noting that this process occurred without a significant increase in long positions, indicating low buying volumes. As of February 7, cryptocurrency quotes stabilized near the $42.8k level, with daily trading volumes around $20 billion.

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The bullish idea, in which Bitcoin manages to establish itself above $45k and update the local high, remains relevant. The bearish idea, in which the asset breaks the $40.5k level and continues its downward movement with the target of breaking $40k, has also not lost its relevance. The wedge pattern forming on the daily chart can serve as an impetus to create conditions for the realization of one of these ideas and may lead to an impulsive price movement in either direction.

Conclusion

Bitcoin maintains the status quo and moves within the established range of $40.5k–$43.4k with minimal trading activity. The formation of the uncertainty pattern, the "wedge," will lead to the BTC price breaking out of the current corridor. However, it is too early to talk about the direction of the breakout as the technical analysis pattern continues to form. In the coming days, significant changes in the price movement of BTC should not be expected, as there are no clear catalysts for a surge in trading activity.

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