Bitcoin fell back below the US$80,000 level on Friday last week after Federal Reserve (Fed) Chairman Kevin Warsh signaled that the US central bank remains focused on bringing inflation back to target.
At the time of writing, Bitcoin was trading at $78,607, up 0.05% since the Asian open on Monday.
The statement pushed short-term US Treasury bond yields higher and put some pressure on riskier assets including Bitcoin.
However, the decline was still considered modest compared to the recovery recorded the previous week.
Bitcoin Falls 4%
Bitcoin fell by around 4% to US$76,871 before stabilizing.
Even so, Bitcoin prices are still well above their early-month highs after surging around 23% the previous week.
Warsh said that current financial conditions are not tight enough and inflation needs to move more clearly towards the Fed's target.
The statement reinforced expectations that US monetary policy may remain tight for a longer period.
Bitcoin was also affected along with other risk assets as investors reassessed the outlook for US interest rates.
Crypto Market Still Looking for Direction
The crypto market is currently in a state of uncertainty after a major short squeeze last week.
A short squeeze occurs when traders who bet on Bitcoin's price falling are forced to close their positions when the price surges. This situation can trigger additional buying and push the price up even faster.
However, open interest for Bitcoin futures has not yet shown a significant recovery after a massive liquidation of leveraged positions.
This situation shows that investors are still cautious and are not ready to take large positions in the market.
50-Week Moving Average Becomes Focus
Investors are now looking at long-term technical indicators to assess whether Bitcoin's recovery has a solid foundation.
According to Galaxy Digital, in four out of five complete crypto bear markets, when Bitcoin successfully breaks above the 50-week moving average, the low of the bear market has usually been formed.
Therefore, Bitcoin needs to maintain its position above that level based on the weekly close to ensure that the bullish structure remains intact.
If it fails to hold, the recovery momentum could be affected again.
Bitcoin Options Signal There Is Still Buying Interest
Meanwhile, Bitcoin options traders are still showing a cautious but positive view for the medium and long term.
Approximately US$6.4 billion of Bitcoin options contracts expire on Deribit, which has the potential to increase price volatility as market makers adjust their positions.
There is also a large block of call options at US$85,000 for September and US$90,000 for the November and December periods.
This situation shows that some investors still expect room for Bitcoin to move higher.
