Countdown to $78K: Is a Crash Looming?

Core inflation, which excludes the variable costs of food and energy, was recorded at 2.6% year-over-year. This figure has heightened worries that inflation may persist at elevated levels, restricting the Federal Reserve’s ability to relax monetary policy.

For Bitcoin, the swift market response added additional macroeconomic strain to what was already a delicate technical forecast.

Fed Outlook Changes Amid Rising Treasury Yields and Strengthening Dollar

The inflation data led to a significant recalibration of interest rate predictions.

According to CME FedWatch statistics, the likelihood of a 25-basis-point rate hike during the October 28 Federal Open Market Committee meeting climbed above 50%, a notable jump from roughly 20% earlier this week.

These probabilities reflect market conditions at the time of the announcement and may fluctuate as new economic data becomes available.

Expectations for rate cuts before the year’s end have also diminished, resulting in a closer balance between maintaining current rates and implementing another hike.

At the same time, yields on US 10-year Treasury bonds have strengthened, and the US Dollar Index has appreciated. Higher yields typically enhance the attractiveness of interest-bearing investments, while a stronger dollar can dampen interest in riskier assets, such as cryptocurrencies.

These combined factors have created a more challenging environment for Bitcoin investors seeking to initiate a recovery.

Bear Flag Formation Indicates Further Downside for Bitcoin

In addition to macroeconomic pressures, Bitcoin’s four-hour $BTC/USDT perpetual chart displayed a possible bearish continuation formation.

This pattern emerged after a drop from around $86,000 to $81,000, followed by a consolidation within a narrow, upward-sloping channel, forming a bear flag.

$BTC has fallen below the channel’s lower edge at approximately $82,371. Furthermore, Bitcoin is trading under its 20-period exponential moving average at $83,196 and its 50-period EMA at $83,384.

These moving averages have created a resistance zone that buyers must surpass in order to gain positive short-term momentum.

Continued rejection in this area would maintain the bearish pattern and increase focus on lower support levels.

Bears have pushed below the support represented by the four-hour 200-period EMA near $82,046. A daily close below this level could expose the psychologically significant $80,000 mark to a potential test.

Momentum indicators offered minimal support for buyers, with the 14-period Relative Strength Index at 43, trending downward, indicating weak momentum without entering oversold territory.

Applying the measured move technique from the bear flag, Bitcoin could see further declines, targeting a downside goal around $78,218.

First, buyers must reclaim the resistance area between $83,196 and $83,384 to challenge the current negative momentum.

A move above roughly $83,400, followed by a breakthrough at $84,000, would undermine the bear flag scenario.

A daily close above $84,000 would provide more compelling evidence of recovery and refocus attention on the previous local high around $86,000.

As long as these levels are not reclaimed, Bitcoin remains vulnerable to additional declines if inflationary concerns continue to impact the broader markets.