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(Kitco News) - The correction witnessed in the cryptocurrency market over the past week deepened on Friday as consumer sentiment data from the University of Michigan showed a notable increase in consumer inflation expectations while debt ceiling talks in the U.S. have yet to result in any meaningful progress.
These factors also weighed down equities, with stocks sliding lower into the weekend as investors remained on edge about the declining state of the global economy. At the market close, the S&P, Dow and Nasdaq were all in the red, down 0.16%, 0.03%, and 0.35%, respectively.
Data provided by TradingView shows that Bitcoin (BTC) lost support at $27,000 in the early hours on Friday and continued to drift lower as the day progressed, hitting a low of $25,905 in the afternoon before bouncing back above $26,400.
BTC/USD Chart by TradingView
The pullback for BTC led to a decline in May Bitcoin futures prices, according to Kitco senior technical analyst Jim Wyckoff, who noted that “Prices today hit a seven-week low and are in a gentle downtrend.”
“The BC bears have the overall near-term technical advantage,” Wyckoff said. “That means the path of least resistance for prices is sideways to lower.”
For analysts at Matrixport, the weakness seen in Bitcoin over the past week is not surprising as, “for the second consecutive month, lower-than-expected U.S. inflation data had only a minor impact on the price of Bitcoin.”
“While we saw rallies of +3.4% and +7.2% on the day of the CPI data release in December 2022 and January 2023, the last two data releases saw only returns of -0.7% and +0.8%, respectively,” they wrote. “Nothing noteworthy.”
BTC performance on the day of the U.S. CPI data release. Source: Matrixport
Additionally, based on the previously established relationship between BTC and tech stocks in the Nasdaq, “Bitcoin should have been above $30,000 by now, and the fact that this is not the case should caution any short-term traders,” Matrixport warned. “This ‘decoupling’ could lead to a more significant divergence between the two.”
Divergence between Nasdaq (tech stocks) and Bitcoin. Source: Matrixport
They also highlighted the fact that despite expectations of an imminent recession in the U.S. by many equity investors, tech stocks have continued to rally, resulting in the need for short-covering. “Unfortunately, Bitcoin does not have large outstanding shorts that could be squeezed — the potential divergence between Nasdaq and Bitcoin,” they observed.
Putting it all together, Matrixport concluded that “It is a good time to wait and be cautious. Our suggestion is to pick up a book and spend time reading; we don’t need to trade the markets daily.”
Select altcoins overcome the negativity
Altcoins traded in the red for the most part, but there were a few bright spots to give some traders hope amid the prevailing negative sentiment.
Daily cryptocurrency market performance. Source: Coin360
The liquid staking platform Lido DAO (LDO) recorded the biggest gain among the top 200, increasing by 11.63% to trade at $1.83, while Decred (DCR) and Core (CORE) recorded gains of 9.5% and SSV Network (SSV) saw its price increase 8.5%.
The overall cryptocurrency market cap now stands at $1.1 trillion, and Bitcoin’s dominance rate is 46.1%.
