Bitcoin (BTC) has been rattled by a cascade of unfavorable events, such as Mt. Gox's ongoing 140,000 BTC repayment to its creditors and the German government's relentless BTC liquidations. Both factors raise the possibility of billions of dollars worth of BTC sales, which has left traders questioning if there are more downsides to the Bitcoin market after its 15% drop in the first week of July.
Bitcoin will drop below $38,000: Analyst
Independent market analyst Matthew Hyland has confirmed his downside price target for Bitcoin to be below $38,000.
In his X post on July 8, Hyland cited Bitcoin's breakdown from a multi-month consolidation range on the weekly chart to support his bearish outlook, noting that the cryptocurrency’s probability of returning inside the same range is low.
The bearish outlook was reinforced by Bitcoin’s weekly relative strength index (RSI) reading of around 45.
This RSI level suggests that neither buyers nor sellers are in control. However, the prevailing market downtrend indicates that the RSI has more room to decline, at least until it hits the oversold threshold of 30, which typically precedes a price rebound.
Similarly, Bitcoin could continue dropping until the RSI reaches the oversold reading of 30, potentially coinciding with Hyland's downside target of below $38,000.
"The weekly RSI has nearly pulled back to the August/September lows of last year when BTC was trading at 25k," Hyland reminded, adding:
"Another red weekly candle would likely push the RSI lower which would then give opportunity for Bullish Divergence"
$50K is the next Bitcoin bottom?
Pseudonymous market analyst Stockmoney Lizards, too, anticipates a further Bitcoin price crash. However, his downside target is around $50,000.
The chartist cites a so-called "Bat Harmonic" pattern behind his limited bearish bias. The pattern starts with an initial price move (XA), followed by a retracement (AB), another move (BC), and a final leg (CD) that extends to 88.6% of the XA leg.
Point D is the critical area where traders expect a reversal, often confirmed by additional signals like candlestick patterns or volume. In Bitcoin's case, the point D coincides with the $50,000 level, following which the price may undergo a sharp recovery.
"We are waiting for another liquidity flush, potentially with a long wick below 50k to establish 52k support," Stockmoney Lizards explains, adding:
"Daily RSI etc are already oversold, however, we believe there is still some more downside. Ideally we consolidate at 52k, forming a bullish divergence with high volume which would be the reversal signal for us."
Macroeconomic prospects for BTC price
Supportive economic data from the United States, particularly increased Wall Street bets on a potential interest rate cut in September, helped mitigate Bitcoin's bearish outlook during its ongoing correction cycle.
As of July 8, futures rate traders have increased their expectations for a 25 basis point rate cut in September to approximately 67.3%, up from 46.6% a month ago, according to CME. This shift toward a more dovish outlook has gained momentum following disappointing U.S. jobs data released on June 5, which triggered a sharp decline in short-term yields.
Lower yields reduce the opportunity cost of holding safer investment assets like U.S. bonds. Instead, they boost demand for riskier assets like cryptocurrencies and stocks. At last week’s close, on June 5, the S&P 500 and Nasdaq indexes closed at a record high.
Bitcoin, too, caught up to the rally, reversing its Mt. Gox, German government-led losses. It has risen 7% from its local low of $53,550, established on June 5. These gains coincide with $398 million worth of weekly inflows into Bitcoin-based investment funds, including exchange-traded funds (ETF).
"Digital asset investment products saw inflows totalling US$441 million, with recent price weakness prompted by Mt Gox and the German Government selling pressure likely being seen as a buying opportunity," says James Butterfill, researcher at asset management firm CoinShares.
Related: Mt. Gox repayments won’t be as bad for Bitcoin as you think
The supportive macroeconomic catalysts, coupled with inflows into Bitcoin-based funds, are providing a positive technical backdrop. Notably, BTC is currently testing its multi-month ascending trendline support, eyeing a sharp rebound toward its mult-month horizontal trendline resistance of around $71,500 in Q3 2024.
Conversely, a drop below the ascending trendline support risks crashing the price toward its 0.786 Fibonacci retracement level at around $51,500, a level closer to the Stockmoney Lizards’ analysis discussed above.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.