Bitcoin is still fluctuating in a narrow range of $19k-$20k. It is trapped in this range, unable to escape it due to low trading activity. Bullish sentiment is also gradually falling, which may indicate a new phase of the bear market.

New phase of bearish cycle

After the publication of the inflation report, traders realized that the Fed would hardly change its stance in the near future. Fed policymakers voiced their strong commitment to shirking the balance sheet.

As a result, bitcoin got stuck near the $19k level for a month. It is still trading trade near this level. At the same time, demand for BTC dropped significantly, which led to a decline in volatility and on-chain activity to the lows of 2010.

Traders are unwilling to buy BTC due to low investment and new developments in the BTC network. Besides, inflation remains high, which is an extremely bearish factor for all risk assets.

According to the latest data, inflation expectations among global financial managers remain at a record level since 2008. It means that they are expecting a long-term fight against inflation. This is why investors do not rush to buy high-risk assets

On top of that, challenges across the bitcoin mining industry are soaring. Despite the end of the massive sell-off of BTC by mining companies, energy consumption has increased by 41% in 12 months. However, the price remains at a low level, which may force regulators to resort to tough actions or make some sharp statements.

The EU may block crypto mining in the near future due to significant problems with electricity in the region. Such a decision is unlikely to adversely affect bitcoin taking into account the unfolding bearish trend. Yet, it may prevent BTC from starting a long-term upward correction.

Positive technical signals

Despite the cornucopia of negative signals and worries about the upcoming winter, BTC accumulation appears healthy. The number of addresses with balances holding 10-100 BTC and 10,000-100,000 has reached a high of February 2021. At the same time, about 66% of holders have not moved their bitcoins for more than a year.

The Tesla report also states that the company retained 10,800 BTC in the third quarter. It means that the asset is gradually recovering and more long-term holders purchase BTC. Therefore, BTC remains a profitable asset.

BTC near-term prospects

BTC is likely to be trading in the sideways range with the prospect of an upswing. Bitcoin has been moving in the range of $19k-$20k for more than a month. During this period, its liquidity has been rising near the borders of the downtrend corridor. Given that market sentiment has been bearish over the past few weeks, BTC is likely to rebound, forcing sellers to close their Stop Loss orders.

After that, the price may sink below $18k and reach the bottom where liquidity levels are quite high. Some analysts assume that BTC will immediately try to break through the bottom. The current sluggish reaction of the asset to the crypto thaw indicates the likelihood of such a scenario. BTC is lacking the strength for an upward movement despite an increase in SPX and other assets.

Given this factor as well as bearish market sentiment due to rising inflation, high rates, and economic woes, bitcoin is expected to resume a downtrend without short-term upward reversals. This will be the most difficult period for the crypto market, followed by the formation of the bottom and a gradual rise to swing highs.