How low can the Bitcoin price go?

The price of Bitcoin (BTC) has fallen three days in a row as traders assess many downside factors, including higher transaction fees and bearish signals for risk-on markets from legendary investor Warren Buffett.

BTC price dropped below $27,500 on May 9, down 8% from its local high of $29,850 established three days ago. Moreover, the dip accompanied a rise in trading volumes, suggesting the move has momentum behind it.

But will this be a short-term downtrend or is there more room to fall? Let's take a closer look. 

H&S pattern hints at BTC price below $25K

Bitcoin price risks dropping below $25,000 in the short term from a technical standpoint.

The downside target is based on Bitcoin's head-and-shoulders (H&S) pattern, confirmed by three peak formations atop a common support level. The middle peak, called the "head," is taller than the other two — the left and right shoulders — which are almost equal in height.

As a rule of technical analysis, 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. 

That raises the possibility of Bitcoin dropping to $24,750 by June, down about 10% from current price levels.

Moreover, independent market analyst Cold Blooded Shiller anticipates the Bitcoin price declining to $25,000, a former weekly resistance, within the next two days.

"I still think that if this snaps the structure it's going to move very quickly (24-48 hours) towards that Weekly level," the analyst tweeted, adding: 

"[$27.5K] is one of the better potential defense points for BTC, but the crypto market has been trading incredibly weakly. Way out of line with its usual correlation to either indexes or metals."

Conversely, a high-volumed rebound from the H&S support would invalidate the bearish setup. A recovery toward $30,000 will then be back on the table.

April's CPI data release

Bitcoin's price has declined in the days leading up to the release of the U.S. inflation data on May 10.

Notably, the core consumer price index (CPI), which excludes food and energy, for April could come near 5.5%, almost the same as the previous month, according to Bloomberg.

This persistent CPI reading means the Federal Reserve would need to continue its 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, a fundamental that aligns with the H&S price target for BTC/USD as mentioned above.

Nonetheless, 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.

He denied the possibility of rate cuts, despite the Fed funds futures’ data expressing the likelihood of at least five rate cuts — a potential buy-signal for Bitcoin investors — between May 2023 and January 2024.

Bloomberg economists:

“Fed Chair Jerome Powell said at the May FOMC meeting that rates might already be ‘sufficiently restrictive’ — but he needs more time to observe developments before he can have confidence in that judgment. Neither April’s CPI nor PPI prints will be reassuring, with both expected to show headline inflation accelerating.”

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.