Bitcoin has dropped below the $78,000 mark and is weakening alongside U.S. stocks. Behind the sudden decline is an escalation of conflict in the Middle East, sharply rising oil prices, and fears of a return to high inflation. The largest cryptocurrency is once again finding itself on the edge of key technical support, the loss of which could trigger a more significant sell-off.
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Expensive oil and geopolitics push markets down
Markets were hit by news of attacks on oil infrastructure in the Middle East, which drove the price of WTI oil to $95 and Brent nearly to $100 per barrel. More expensive energy immediately raised concerns about a resurgence of inflationary pressures just before the release of new U.S. CPI figures. In response, both the S&P 500 and Nasdaq stock indices began selling off, as did bitcoin itself, which fell to $77,600 during Wall Street’s opening.
The cryptocurrency market’s reaction thus once again faithfully mirrored the behavior of traditional risk assets. Although the price of bitcoin recovered slightly above $78,000 after the initial drop, the macroeconomic environment remains highly uncertain for investors and expectations regarding the upcoming moves by the U.S. Fed continue to grow.
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Key level of $78,300 will determine further development
Well-known analyst Rekt Capital points out an alarming similarity to the scenario from this past May. At that time, bitcoin failed to hold the $78,300 level after an unsuccessful breakthrough above $82,000, which triggered a gradual decline to a new local bottom at $57,000. A weekly candle close below this level would thus confirm a bearish structure and the risk of forming another lower high within a broader downtrend.
Investors are thus facing a crucial test. If buyers can defend the $78,300 level and quickly regain it as solid support, it will signal that the market is only going through a normal correction. Otherwise, it will open up room for a deeper drop, which would confirm a return to the negative May scenario.
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