Bitcoin price to take a breather as midsize US banks request Fed to insure deposits for two years

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• Bit­coin price and momen­tum indi­ca­tors do not seem to be aligned, sug­gest­ing the pos­si­bil­i­ty of a reversal.
• Investors need to be con­fi­dent in their approach and decide if they want to sell or accu­mu­late more.
• Inval­i­da­tion of the ongo­ing bull ral­ly will occur on a deci­sive flip of the $21,405 sup­port level.

Bit­coin price has expe­ri­enced a quick ral­ly after dip­ping into the week­ly inef­fi­cien­cy to the down­side. As a result, the sec­ond leg of the uptrend began in March, push­ing BTC to nine-month highs and anoth­er inef­fi­cien­cy to the upside. How­ev­er, the big cryp­to seems to be devel­op­ing a diver­gence on the three-day chart, which could be an oppor­tu­ni­ty to accu­mu­late or sell-sig­nal for bears. But as the bank­ing cri­sis deep­ens, this move could affect the BTC’s next move.

Also read: Why Teth­er (USDT) and TrueUSD (TUSD) whales are key for cryp­to bull rally?

Small banks seek refuge with the Federal Reserve

A coali­tion of mid-size banks has request­ed the fed­er­al author­i­ties to extend its sup­port amid falling bank­ing sys­tem. The banks rea­son that if the Fed insures deposits for two years, it would restore investor con­fi­dence and pre­vent a fur­ther run on the banks. 

As report­ed by Bloomberg, this coalition’s let­ter says that “the over­all health and safe­ty of the bank­ing indus­try, con­fi­dence has been erod­ed in all but the largest banks” and the “con­fi­dence in our bank­ing sys­tem as a whole must be imme­di­ate­ly restored.”

Read More: Sil­i­con Val­ley Bank and Sig­na­ture Bank hear­ing to be held on March 29, FDIC Chair­man set to witness

Bitcoin price shows a build-up of exhaustion

Bit­coin price trig­gered its first run-up in Jan­u­ary as it inflat­ed 41% in the first three weeks. This move was fol­lowed by a pow­er strug­gle between the bulls and bears, which led to a side­ways move­ment and a deep pull­back into the inef­fi­cien­cy, extend­ing from $17,181 to 20,388. This inef­fi­cien­cy is termed a Fair Val­ue Gap (FVG) and was cre­at­ed on the week­ly time­frame as there was an excess of bull­ish momen­tum from investors. Thus, this FVG is also known as the buy-side imbalance.

Typ­i­cal­ly, after cre­at­ing a buy-side imbal­ance, the asset pulls back into this zone to rebal­ance and, in some cas­es, fuel up for the next leg. For Bit­coin price, the retrace­ment allowed side­lined buy­ers to step in and trig­ger the sec­ond phase of the ral­ly that pushed the big cryp­to to tag a nine-month high of $27,763.

Inter­est­ing­ly, Bit­coin price went from a buy-side imbal­ance to a sell-side imbal­ance, which extends from $26,877 to $29,220. The cur­rent posi­tion of BTC makes it so that there could be a fur­ther exten­sion of the ral­ly up to $29,220. 

While Bit­coin price action has scaled new month­ly highs, investors should note that the suc­ces­sive high­er highs cre­at­ed since mid-Jan­u­ary do not align with the Rel­a­tive Strength Index (RSI) and Awe­some Oscil­la­tor (AO) momen­tum indi­ca­tors which denote a declin­ing strength from the buy side. 

This non-con­for­mi­ty reveals the devel­op­ment of a bear­ish diver­gence, which results in either a small pull­back or a deep correction.

BTC/USDT 3‑day chart

BTC holders wonder if this is a sell signal or buying opportunity

Con­sid­er­ing that Bit­coin price depegged from the neg­a­tive cor­re­la­tion with the US Dol­lar and ral­lied amidst the Bank­ing Cri­sis of 2023 reveals the nature of this uptrend. Cur­rent­ly, BTC is reflect­ing the uncor­re­lat­ed asset narrative. 

Due to the col­lapse of the tra­di­tion­al finance banks, some of the sta­ble­coin plat­forms were affect­ed, which cre­at­ed ini­tial sell­ing pres­sure. One can spec­u­late that as investors recov­ered from the FUD, they began think­ing straight and start­ed invest­ing in Bit­coin, which is rel­a­tive­ly more sta­ble than the stablecoins. 

So a cap­i­tal inflow into Bit­coin could be the main rea­son for this ral­ly. Hence, the bear­ish diver­gence could be a buy­ing oppor­tu­ni­ty, pro­vid­ed BTC holds above the $21,405 sup­port lev­el. If suc­cess­ful, the next tar­get for the pio­neer cryp­to would be the upper lim­it of the sell-side inef­fi­cien­cy, stretch­ing from $26,877 to $29,220.

How­ev­er, a deci­sive flip of the $21,405 sup­port lev­el in a three-day chart would inval­i­date the bull­ish the­sis for BTC. Such a devel­op­ment would trig­ger a deep cor­rec­tion for Bit­coin price that rebal­ances the buy-side imbal­ance, extend­ing from $17,181 to $20,386.

Sell­ers could take this pull­back to the next lev­el and dri­ve Bit­coin price low­er to sweep the sell-side liq­uid­i­ty below equal lows at $15,462.

The video attached below explains key high timeframe levels to watch for Bitcoin price