Original title: Is Bitcoin price going to crash again?
Original author: Yashu Gola
Original source: cointelegraph
Compiled by: Mars Finance, Eason
Bitcoin prices are rising as favorable macroeconomic factors offset concerns about Mt. Gox, but some analysts predict that the price of Bitcoin could fall below $50,000 in the coming weeks.
The market has been roiled by a series of adverse events, such as Mt. Gox's repayment of 140,000 bitcoins to creditors and the German government's massive bitcoin sell-off. Both factors have increased the likelihood of billions of dollars of bitcoin being sold, leading traders to wonder if the bitcoin market has more downside after a 15% drop in the first week of July.
Analyst: Bitcoin will fall below $38,000
Independent market analyst Matthew Hyland has identified a downside price target for Bitcoin below $38,000.
In a July 8 X post, Hyland cited Bitcoin’s breakout from a multi-month consolidation range on the weekly chart to support his bearish view, noting that the probability of Bitcoin returning to the same range is low.
BTC/USD weekly price chart. Source: Matthew Hyland
Bitcoin’s weekly relative strength index (RSI) reading is around 45, further confirming the bearish outlook.
This RSI level suggests that neither buyers nor sellers are in control of the market. However, the current market downtrend suggests that the RSI has more room to fall, at least until it reaches the oversold threshold of 30, which typically signals a price rebound.
Likewise, Bitcoin could continue to fall until the RSI reaches an oversold reading of 30, which could coincide with Hyland’s downside target below $38,000.
“The weekly RSI has almost fallen back to the lows of August/September last year, when BTC was trading at $25,000,” Hyland reminded, adding: “Another red weekly candle could push the RSI lower, providing an opportunity for a bullish divergence”
Is $50,000 the Next Bottom for Bitcoin?
Anonymous market analyst Stockmoney Lizards also expects the price of Bitcoin to plunge further. However, his downside target is around $50,000.
The chart cites the so-called "Bat Harmonic" pattern to explain its limited bearish bias. The pattern begins with an initial price move (XA), followed by a retracement (AB), another move (BC), and finally a final move (CD) that extends 88.6% of the XA move.
BTC/USD two-day price chart with the Bat harmonic pattern. Source: Stockmoney Lizards
Point D is a key area where traders expect a reversal to occur, which is usually confirmed by other signals such as candlesticks or volume. In the case of Bitcoin, Point D coincides with the $50,000 level, after which the price could recover significantly.
"We are waiting for another liquidity flush, possibly long term support below 50k to establish support at 52k," explained Stockmoney Lizards, adding: "Indicators like the daily RSI are oversold, but we think there is still some downside. Ideally, we would consolidate at 52k and form a bullish divergence on high volume, which would be our reversal signal."
The macroeconomic outlook for BTC prices
Strong economic data from the United States, especially as Wall Street increased bets on a possible interest rate cut in September, helped ease the bearish outlook for Bitcoin in the current correction cycle.
As of July 8, futures rate traders’ expectations for a 25 basis point rate cut in September had increased to about 67.3% from 46.6% a month earlier, according to the Chicago Mercantile Exchange (CME). The shift toward a more dovish outlook gained momentum after disappointing U.S. jobs data released on June 5 triggered a sharp drop in short-term yields.
Daily performance chart of US 2-year and 5-year Treasury yields. Source: TradingView
Falling yields reduce the opportunity cost of holding safer investment assets such as U.S. bonds. Conversely, they boost demand for riskier assets such as cryptocurrencies and stocks. Both the S&P 500 and Nasdaq hit all-time highs at the close of last week, June 5.
Bitcoin has also caught up with the rally, reversing the decline led by Mt. Gox and the German government. Bitcoin has risen 7% from its low of $53,550 on June 5. At the same time, $398 million worth of funds have flowed into Bitcoin investment funds, including exchange-traded funds (ETFs), every week.
Crypto fund net flows for the week ending July 5. Source: CoinShares
James Butterfill, a researcher at asset manager CoinShares, said: “Inflows into digital asset investment products totalled $441 million and recent price weakness caused by selling pressure from Mt Gox and the German government could be seen as a buying opportunity.”
Favorable macroeconomic catalysts, coupled with inflows into Bitcoin ETFs, provide a positive technical backdrop. Notably, BTC is currently testing its multi-month ascending trendline support, poised for a sharp rally toward its multi-month horizontal trendline resistance around $71,500 in the third quarter of 2024.
BTC/USD weekly price chart. Source: TradingView
Conversely, a break below ascending trendline support could see prices fall to the .786 Fibonacci Retracement level (around $51,500), a level closer to the Stockmoney Lizards analysis mentioned above.
