The price of Bitcoin has been falling for three days straight, and there are several factors that traders are considering which could cause a further decline. One of these factors is the higher transaction fees associated with Bitcoin. Additionally, legendary investor Warren Buffett has recently provided negative signals for risk-on markets, which could also contribute to Bitcoin's price decline.
Bitcoin's price fell below $27,500 on May 9th, down 8% from its recent high of $29,850 just three days earlier. A rise in trading volumes also suggests that the price drop may continue.
From a technical standpoint, Bitcoin is at risk of falling below $25,000 in the short term due to a head-and-shoulders (H&S) pattern. The H&S pattern is confirmed by three peak formations atop a common support level, with the middle peak, called the "head," being taller than the other two shoulders, which are almost equal in height.
A decisive break below the H&S support level near $27,500 could have the price fall by as much as the pattern's maximum height, i.e., the distance between the head and the support level. This could cause Bitcoin to fall to $24,750 by June, down about 10% from current price levels. Independent market analyst Cold Blooded Shiller also anticipates the Bitcoin price declining to $25,000, a former weekly resistance, within the next two days.
Conversely, if there is a high-volumed rebound from the H&S support, the bearish setup will be invalidated, and the price could recover toward $30,000.
The decline in Bitcoin's price comes ahead of the release of U.S. inflation data on May 10th. The core consumer price index (CPI), which excludes food and energy, for April is expected to be nearly 5.5%, which is almost the same as the previous month. This persistent CPI reading means that the Federal Reserve may need to continue interest rate hikes to bring inflation down to its preferred target of 2%. Higher interest rates tend to decrease investors' appetite for riskier zero-yielding assets like Bitcoin, which aligns with the H&S price target for BTC/USD.
However, Jerome Powell, the chairman of the Federal Reserve, said last week that they would pause rate hikes in June to study how the U.S. economy has responded to higher interest rates and the ongoing banking sector crisis. This means that despite the potential for higher interest rates in the future, the Federal Reserve may not immediately raise interest rates in the coming months.