Bitcoin Tests Key Support Levels After US Inflation Release

What Is Happening with Bitcoin's Price Right Now?

Bitcoin (BTCBTC-0.87%) recently experienced increased volatility following the release of the latest United States Consumer Price Index (CPI) report, which showed inflation running hotter than expected. After the report, Bitcoin's price slipped below its 200-day moving average around $73,100. This technical indicator is widely followed by market participants to evaluate medium-to-long-term price trends.

When an asset's price drops below a long-term moving average, it often signals that buying momentum is slowing down in the short term. Earlier this year, this same 200-day moving average provided strong support during an August pullback, which eventually helped propel prices upward toward $87,400 in September. Since that peak, approximately 16.5% of that valuation has receded.

Past performance of digital assets is not an indicator of future returns. You can view historical market data and current trends on Bitkub Market.

Why Are Buyers Stepping Back?

To understand why buyer demand has softened, analysts point to two key areas of market liquidity: stablecoin supply and institutional exchange-traded fund (ETF) flows.

1. A Reduction in USDT Stablecoin Supply

According to research from analytics platform CryptoQuant, the market capitalization of TetherUSDT+0.54% decreased by approximately $6.6 billion over a recent 60-day period. Think of stablecoins like USDT as liquid cash sitting on the sidelines of the crypto market. When traders hold stablecoins, they maintain readily available buying power to re-enter positions.

A contraction in stablecoin supply indicates that capital may be leaving the digital asset ecosystem or shifting toward alternative cash equivalents. Notably, this $6.6 billion reduction is more than double the contraction recorded following the collapse of FTX in 2022. A smaller overall supply of USDT can reflect reduced immediate purchasing power across trading platforms.

2. Sustained ETF Outflows

In parallel, institutional participation via spot Bitcoin ETFs in the United States has seen a temporary pause in net inflows. Spot Bitcoin ETFs recorded $1.28 billion in net outflows last week, followed by an additional exit of roughly $201 million on Monday. Blockchain analytics firm Glassnode noted that these continued outflows have added noticeable selling pressure to spot market order books.

Key Price Levels Market Participants Are Watching

Traders are monitoring several technical price zones to gauge where market equilibrium might form next. It is essential to remember that crypto asset prices are subject to market volatility and broader macroeconomic conditions.

• $73,100 (200-Day Moving Average): Reclaiming and sustaining a daily close above this level could help reduce immediate downside momentum.
• $72,165: Represents the next immediate structural support level. Holding above it may stabilize price action, while losing it could lead to tests of lower ranges near $68,000.
• $66,200 – $67,300: A historical resistance region from earlier trading cycles that could potentially act as a demand zone.
• $62,750: Marks the August low, representing a deeper technical support level if broader market selling continues.

Analyst Insights on Order Book Liquidity

Market analyst CryptoKid recently highlighted a potential gap in buyer liquidity between major key levels. He observed that order book demand appears relatively thin between $73,500 and $66,700.

"There is absolutely no demand for Bitcoin between roughly $73,500 and $66,700. $73,500 happens to be the 200-day moving average, which is the good news. As long as we stay above that level, BTC should be fine. But losing it could drag the price down another 9.5%."

While CryptoKid maintains a positive outlook on Bitcoin's long-term potential, his short-term analysis highlights how localized gaps in market liquidity can lead to larger price movements. If macroeconomic conditions stabilize and institutional ETF inflows return, prices could recover toward higher resistance levels. Conversely, if liquidity remains constrained, further downside testing could occur.

What Does the RSI Technical Indicator Suggest?

From a momentum standpoint, Bitcoin's Relative Strength Index (RSI) recently approached a reading of 33. The RSI measures price velocity on a scale of 0 to 100, where values below 30 typically indicate that an asset is entering an "oversold" zone.

An oversold reading can sometimes signal that selling momentum is becoming stretched, which can lead to short-term price rebounds or consolidation. However, technical indicators should be viewed in context. For any potential price recovery to remain sustainable over time, market liquidity and spot ETF demand will likely need to show consistent signs of improvement.