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USD runs the show behind the scenes as the Easter weekend sparks pain for Bitcoin bulls.

Bitcoin (BTC) starts a new week with all quiet on traditional markets but a storm brewing in crypto.

As the Easter long weekend continues for the United States and much of Europe, traders are keenly eyeing whether Bitcoin can stay stable for four days without professional investor involvement.

So far, the picture has not favored bulls — since Good Friday, BTC/USD has been characterized by sideways action punctuated by episodes of sudden volatility to the downside.

That continued overnight into Monday, and now, $40,000 is once again out of reach. What will the atmosphere be like in the coming days?

Cointelegraph takes a look at the potential market mover factors in line to influence Bitcoin price performance this week.

Holiday cheer costs Bitcoin $40,000

It’s a frustrating time for Bitcoin spot traders. Without traditional market guidance, Bitcoin faces four days of “out-of-hours” trading, meaning that liquidity is thinner than normal.

This has a habit of making any sudden price moves ripple out and cause large than normal knock-on effects.

Should buyer support at a specific price be pulled, for example, panic can set in more easily when there are fewer participants — and less cash — on hand to mitigate it.

Such a scenario has played out several times over the Easter weekend already. While mostly trading sideways, BTC/USD saw episodes of sudden downside from which it struggled to recover.

Overnight on Sunday, the market dived over $1,000 in a matter of minutes, including an $800 loss in a single one-minute candle.

With it came the loss of support at $39,000, data from on-chain monitoring resource Material Indicators confirms.

On Friday, Material Indicators noted the block of buyer support immediately below spot price, this now absent and potentially opening up the possibility of a much deeper retracement to come, involving Bitcoin’s 200-week moving average (200 WMA).

The 200 WMA currently sits at just above $21,000, data from Cointelegraph Markets Pro and TradingView shows. The level is highly significant, never being broken by spot price during bear markets and continually rising throughout Bitcoin’s history.

“50, 100 and 200 Weekly MA are key levels,” Material Indicators meanwhile continued in Twitter comments.

“Bull Markets happen when price is above the 50 WMA. The 100 may give a relief rally, but since 2011 it's never held in a downtrend. The 200 WMA has always marked the bottom + it has confluence with the lifetime support channel.”

The 100 WMA “relief rally” site is at $35,740 as of Monday.

Despite the potentially unreliable holiday price performance, few appeared surprised by the idea that crypto markets en masse are primed for fresh losses.

Popular trader Pierre flagged multiple targets hit across altcoins Monday as BTC wobbled, having previously warned that such a downmove would be the “nail in the coffin” for weak tokens.

Macro has plenty of surprises up its sleeve

With Western markets closed until Tuesday, there is little scope for a macro-induced move on crypto.

Asian markets were mostly flat throughout Monday, with the Hong Kong Hang Seng up a modest 0.67% and the Shanghai Composite Index conversely down 0.67% at the time of writing.

Global financial markets, however, are anything but unremarkable this month, as uncharted territory defines the current setup. Surging inflation coupled with rock-bottom interest rates is one such novel feature.

For markets commentator Holger Zschaepitz, the focus was on the international bonds markets, these having wiped $6.4 trillion off their value since hitting all-time highs last year.

“The biggest bond bubble in 800yrs continues to deflate after rising US inflation data (CPI & PPI) shake up the bond markets. The value of global bonds has dropped by another $400bn this week, bringing total loss from ATH to $6.4tn,” he commented alongside a chart.

Japan’s central bank balance sheet expansion, which Zschaepitz previously called the greatest monetary policy experiment “in history,” is meanwhile delivering fresh phenomena in the form of spiking inflation.

Inflation is a double-edged sword for Bitcoiners, the tide of rising prices and central bank reactions set to put serious pressure on both stocks and risk assets at first. Only later on, various theories argue, will the tide turn in favor of Bitcoin as a store of value.

“The contrast between high equity prices and tame commodities on a 10-year basis may point to greater odds of decreases for stocks,” Bloomberg Intelligence senior commodities strategist Mike McGlone, a proponent of that perspective, wrote in his latest update last week.

“The S&P 500 was up about 280% as of the end of 2021, and our rate-of-change graphic shows the index as a top potential reversion risk vs. the Fed.”

DXY faces "do or die" decision

One yardstick for the traditional economy is meanwhile at what could turn out to be a crucial inflection point.

The U.S. dollar currency index (DXY), a key measure of dollar strength, is facing a choice between continued upside and a major correction as it lingers at the 100 points threshold.

It was a long time coming — the last time that DXY was so bullish was in April 2020 at the height of the coronavirus market shock.

DXY has a habit of running in opposition to Bitcoin price, and while that inverse correlation has broken down to some extent in the past year, the odds remain that a major drawdown for USD would be a benefit to BTC.

“If we see the DXY roll over again at this trendline be prepared for a strong send,” markets commentator Johal Miles summarized Sunday.

“Naturally the FED has key importance here, as any change of course will put pressure on the dollar.”

An accompanying chart highlighted the impact of DXY retracements on BTC/USD since late 2014.

On Monday, however, there were no real signs of a reversal, and a brief dip in DXY last week — which coincided with an equally brief rally in BTC — was soon mitigated entirely.

“Many calling for corrections on DXY but still looking bullish,” popular chartist Jesse Olson added on the day.

Exchange balances lowest since mid-2018

What are the more bullish signals coming from Bitcoin in the current environment?

Look no further than exchanges for one, as their declining balances point to sustained determination to “hodl” BTC.

According to the latest data, not only are buyers continuing to move large tranches of coins off exchanges into cold storage, but those exchanges’ overall BTC balance is now at fresh multi-year lows.

Figures from on-chain analytics firm CyptoQuant confirm that the balance of 21 major exchanges was 2.274 million BTC as of Sunday. The last time that the level was so low was in July 2018.

The impact of such buyer trends has yet to be seen in practice. Despite the available supply declining, a real scramble for BTC has not yet occurred, while sellers have conversely sought to exit at levels approaching $50,000 in recent weeks.

The result is a narrow scope of movement for BTC price action as buyers and sellers act in a closely-guarded range. Ki Young Ju, CEO of CryptoQuant, noted the phenomenon playing out last week.

As Cointelegraph reported, meanwhile, the likely source of the exchange supply sapping is institutional, rather than retail investors.

Crypto sentiment diverges into "extreme fear"

Is crypto market sentiment truly indicative of a shock in the making?

Related: Top 5 cryptocurrencies to watch this week: BTC, XRP, LINK, BCH, FIL

Bitcoin has been praised as the “only” truly honest market available to investors, and its decline from all-time highs thus foreshadowed this year’s inflationary environment hostile to stocks, commodities and more.

Should that hold true, the current state of the Crypto Fear & Greed Index may give investors fresh pause for thought.

At 24/100 as of Monday, the Index is back in its “extreme fear” zone, having more than halved since the start of April.

By contrast, the traditional market Fear & Greed Index is “neutral,” a zone in which it has stayed since exiting the “fear” zone late last month.

While equally famous for its fickle nature, crypto market sentiment could nonetheless be a warning for those hoping that the good times will continue regardless.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.