Thursday marked a pivotal day for the cryptocurrency markets as Bitcoin (BTC) struggled to break through a key resistance level despite favorable U.S. inflation data. The cryptocurrency’s downward trend, persisting since early June, continued unabated.
The U.S. reported its first drop in consumer prices in four years, lifting market sentiment and boosting expectations for a Federal Reserve rate cut. This buoyed higher-risk assets, including Bitcoin. For a brief moment, it seemed Bitcoin bulls might secure a position above the descending trendline, stemming from the June highs near $72,000. Such a breakthrough would have signaled the end of the pullback and potentially attracted momentum traders, as noted in Thursday’s “First Mover America” report.
However, the bullish momentum was short-lived. Prices reversed from the trendline resistance and dropped below $57,000 early today, dampening hopes for a rally.
The recent failure of Bitcoin to maintain upward momentum, despite positive macroeconomic news, suggests further price weakness ahead. A similar rejection at the trendline on July 1 led to a significant deepening of the sell-off.
Nonetheless, there remains a glimmer of hope for the bulls. The daily chart’s MACD histogram, an indicator used to assess trend strength and changes, is hinting at a crossover above zero, which could indicate an impending bullish shift in momentum.
The supply overhang from Germany’s Saxony state, which triggered the price drop earlier this month, is nearly exhausted. Additionally, uncertainty surrounds how much of the 95,000 BTC—a portion of the total 140,000 BTC set to be distributed to Mt. Gox’s creditors—will actually be liquidated.
Crypto prime broker FalconX noted in a newsletter on Friday, “The prospect of some of the $16.3 billion FTX repayment over the next months translating into buying pressure, the increasingly positive stance toward crypto on both sides of the aisle, and the potential of an interest rate cut in September benefiting risk assets more generally should embolden medium- and long-term bulls.”
FalconX also suggested that potential sales by Mt. Gox’s creditors might differ from Saxony’s sales. “For example, maybe more flow will go to exchanges versus professional liquidity providers, or maybe a more diversified holder base will spread sales over time,” FalconX speculated.
In summary, while Bitcoin’s recent performance has disappointed bulls, indicators of potential bullish momentum and favorable macroeconomic conditions could provide support in the medium to long term.
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