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09.02.2023 01:55 PM
Bitcoin drops below $23k following stock indices: what does Google have to do with it and should we expect a correction?

Bitcoin continues to consolidate within the $22.8k–$23.4k area. The cryptocurrency still has bullish potential, but reacts extremely sharply to external events. A key role in this is played by stock indices, which maintain a high level of correlation with the asset.

Volatility spikes and sharp changes in the direction of price movement occur within the consolidation range of $22.8k–$23k. Given this, there is no need to talk about a radical change in the dynamics of Bitcoin, but sellers manage to make the most of the volatility spikes.

Situation with Google and stock markets

In the current trading week, Bitcoin was very close to the start of a corrective movement with a potential of $21.6k–$22.4k. However, according to the results of Tuesday, February 7, buyers finally managed neutralize the advantage of the bears.

However, the next two days led to another increase in bearish volumes. Bitcoin ended the previous trading day near $22.6k. As of writing, the cryptocurrency has finally broken through the $22.8k support level.

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Among the key catalysts for the cryptocurrency's downward spurt are the stock market and the situation with Google shares. Users have reportedly found a factual bug in Google's artificial intelligence technology.

This provoked a sharp drop in the shares of the world giant and had a negative impact on the quotes of other indices. The S&P 500 tested the $4,000 level and struggled to stay above it. Other stock assets also dipped following the results of yesterday's trading day.

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The wave of volatility hit the crypto market due to the high level of correlation between BTC, SPX and NDX. The only difference is that the consequences for Bitcoin may be more unpleasant than for stock indices.

However, do not assume that the local stock market crash will not escalate into a large-scale correction. Analysts at Goldman Sachs report that companies in the S&P 500 continue to approve buybacks for 2023 at a record pace, which are a key part of the bullish trend in assets.

BTC/USD Analysis

Despite all the movements in the global economy and the stock market, Bitcoin continues to be in demand. Santiment reports that BTC outflows from exchanges continue, and cryptocurrency reserves on platforms have reached their lowest level since November 2018.

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At the same time, Santiment reports that the expectations of a rally in January for the crowd are gradually replaced by skepticism in February. This can be a signal for growth when building up short positions, but also a catalyst for a corrective movement when forming a sequence of red candles and breaking through important support levels.

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As of writing, Bitcoin is trading below the $22.8k level, which is an important springboard for a bullish move. If the asset fails to recover above $22.8k at the end of the current trading day, we can expect a further fall to the $22.4k level.

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Technical metrics continue to decline: RSI and stochastic are gradually moving to the lower part of the bullish zone. On the daily chart of the cryptocurrency, the lower wick continues to form and grow, indicating that buyers are becoming more active.

This reduces the probability of a $22.4k retest, but we are not yet seeing a massive pullback. If BTC price fails to consolidate above $22.8k, it will continue to decline to the $22.4k level; and lower to $22k.

Results

To maintain the structure of the bullish trend, Bitcoin needs to recover above $22.8k. As of writing, there are not enough buying volumes, but there is every reason to believe that with the opening of the U.S. markets, investors will begin to buy back yesterday's fall and BTC will be able to recover.

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