Some crypto enthusiasts on Twitter are worried about a price decline after a widely-tracked Bitcoin (BTC), technical analysis indicator, has turned bearish.

According to TradingView, the moving average convergence divergence histogram ( MACD), which is used to measure trend strength and change, has fallen below zero in the weekly bitcoin chart. This is a sign of a shift from bullish to bearish and is generally regarded as a signal to sell. Crossovers above zero indicate the opposite.

Some analysts say, however, that the signal will be undermined by macroeconomic events, such as today’s U.S. inflation figures and Wednesday’s Federal Reserve decision, which will also affect bitcoin’s price performance. The signal is still coming after BTC’s 16 percent decline from its highs of around $31,000 two months ago. This raises questions about whether the bullish revival seen early in the year will continue.

Crypto trader @CryptoBullet1 sent out a tweet on Monday referring to those who had expected a meteoric rise.

According to @CryptoBullet1, according to the MACD cross bear, it looks similar to a cross observed around four years ago. The market had just experienced a rally similar to the one seen in the last two months. It then nosedived after the MACD indicator turned bearish.

The market also suffered from the bearish crossovers in April 2022 and November 2021, as well as April 2021.

One user on Twitter said that the MACD has a history of accurately predicting market declines.

Support for key components intact

Katie Stockton is the founder and managing director of Fairlead Strategies a provider of technical research analysis. She disagrees.

Stockton wrote in a Monday note to clients that a new MACD “sell” signal was a possible setback. However, short-term and intermediate-term conditions of oversoldness are already in place, giving bitcoin a greater chance to hold up near the support level [at $25200].

Bitcoin continues to hold the resistance-turned-support of $25,200 amid regulatory uncertainty and panic selling in alternative cryptocurrencies. Prices have blown past this level in March, which confirms a bull recovery.

(Fairlead Strategies) (Fairlead Strategies/TradingView) Bitcoin remains at support of $25,200 in spite of MACD’s bearish turn. (Fairlead Strategies) (Fairlead Strategies/TradingView)

The weekly chart shows that bitcoin is holding support at $26,200. This level is marked by a horizontal line, and the stochastic indicator, which is just shy of flashing a signal for oversold with a reading below 20.

Oversold indicators are not reliable as standalone indicators. However, when they occur in conjunction with prices that trade at critical support levels, such as BTC, then these signals often indicate renewed interest in buying.

Focus on macro data

The U.S. Consumer Price Index (CPI) and the Fed’s rate decision on Wednesday could also make or break price charts.

Bloomberg estimates that the CPI for May will show a 0.2% increase from the previous month, and 4.1% from the year before. This is a slower pace than April’s gain of 4.9%. Core inflation (which excludes volatile food and fuel components) is expected to be up 0.4% from month to month and 5.2% on an annual basis.

David Brickell is the director of institutional sales for Paradigm’s crypto liquidity network. He says that bitcoin has a strong bias.

“We have digested many bad news stories in the last couple of weeks. This includes a reprice on higher rates, and the U.S. Dollar since April. Brickell tweet that the risk/reward of a return to the top end of range is attractive. “I also believe likely CPI will undershoot, and the markets are behind how quickly inflation drops from here.”

The Fed would have more room to reduce interest rates if the CPI declined faster. Since March 2022 the central bank has increased rates by 500 basis point, which has destabilized risk assets including cryptocurrencies.

Sheldon Reback is the editor.