Bitcoin (BTCUSD) has been on a rally this year, rising by almost 60% to reach around $27,000. However, the cryptocurrency has been unable to break past the $30,000 mark. Last week, the price corrected itself to around $25,000, which strengthened its correlation with several traditional financial metrics. This has raised the question of whether Bitcoin will continue to decline in Q2.

One factor that may impact Bitcoin’s price is the U.S. dollar index (DXY). In the week ending May 14, the DXY rose 1.4% to 102.70, marking its best week since September 2022. The dollar’s rise has left behind a potential double bottom pattern, which is a bullish reversal setup that suggests DXY could rise towards 105.85 in the coming months. This is typically a bad omen for Bitcoin's price as there is a strengthening negative weekly correlation between Bitcoin and DXY, with the coefficient around -50 as of May 14.

The rise in the DXY comes as the latest U.S. consumer price index (CPI) report showed headline inflation dropped to 4.9% in April versus the previous month's 5%. However, core inflation was up 5.5%, suggesting underlying price pressures remain sticky. This has cooled down Fed rate cut expectations, and the odds of a “pause” in interest rate hikes next month have now risen to virtual certainty in futures and swaps markets, according to John Authers from Bloomberg.

Another factor that may affect Bitcoin’s price is the price of gold. Gold has risen nearly 15% to over $2,000 an ounce amid the banking crisis, and its positive correlation with Bitcoin has also grown stronger, with its weekly coefficient reading at 0.82 as of May 14. However, the price of gold is now near a horizontal resistance level of $2,075. In March 2022, this level triggered a sharp bearish reversal phase that led the gold's value down by up to 22%. Similarly, testing the level as resistance in August 2020 preceded an 18% price decline. If this scenario repeats in 2023, gold's price could fall towards its 50-week exponential moving average (50-week EMA; the red wave) near $1,850. As a result of the precious metal's positive correlation with Bitcoin, the latter may see a similar correction in Q2.

M2 money supply is also a factor that could impact Bitcoin’s price. M2 measures cash in circulation plus dollars in bank and money-market accounts. During the Covid-19 pandemic, the M2 figure surged by more than 40% due to the Fed's quantitative easing, hitting a peak of $21.84 trillion in January 2022. However, it has since declined to $20.81 trillion in May 2023, down over 4% from its peak. A 2%-plus drop in the M2 supply is bad news for the stock market since it preceded three depressions and one panic. Therefore, the significant move lower in M2 could foreshadow new lows for Bitcoin, which often moves in tandem with U.S. stock indexes.

Finally, Bitcoin appears to be heading towards a “rising wedge” pattern, which is a bearish reversal pattern that appears when the price rises higher inside a range defined by two contracting, ascending trendlines. It resolves after the price breaks below the lower trendline, falling by as much as the maximum wedge height. If this BTC price pattern is confirmed, particularly given the above-mentioned macro indicators, Bitcoin price stands to decline to as low as $15,000 in 2023, down about 45% from current price levels