Three major bearish warning signals 1. Market sentiment shifts
Before the Bitcoin crash, there was an overly optimistic sentiment in the market. Many investors and analysts were expecting Bitcoin to continue to break through historical highs. However, rapid changes in market sentiment often trigger large price fluctuations.
In early August, some influential cryptocurrency commentators on the social media platform Twitter (now X), such as CryptoWhale and TheMoon, posted several analytical articles on the possible bubble in the Bitcoin market in succession, which caused a lot of forwarding and discussion. At the same time, the Wall Street Journal and the Financial Times also published several articles questioning the high valuation of Bitcoin. These remarks and reports spread rapidly, triggering panic among investors and leading to large-scale selling in the market.
2. Technical indicators issued a warning
The relative strength index (RSI) shows that Bitcoin has entered the overbought area, indicating that the market may be subject to a correction. In addition, the crossover of the moving averages also indicates that prices may go lower.
In early August, a "death cross" was formed on the daily chart of Bitcoin-the 50-day moving average crossed the 200-day moving average, which is a typical bearish signal. In addition, the relative strength index (RSI) had exceeded 70 a week before the plunge, entering the overbought zone. These technical indicators indicate that the market is overheated and prices may be subject to a correction. On August 5, these technical signals were verified by the market and the price of Bitcoin fell rapidly.
3. Changes in the macroeconomic environment
Recently, the uncertainty of the global economic situation has increased, and the Federal Reserve's monetary policy has become more tight, which has put pressure on high-risk assets such as Bitcoin. In particular, the Fed's interest rate hike policy has caused funds to flow from high-risk assets to safer investment targets, which in turn triggered a wave of Bitcoin selling.
At the end of July, the Federal Reserve announced another 25 basis point interest rate hike and said that it may continue to raise interest rates in the future. This news triggered market concerns about high-risk assets, leading to a wave of selling in the cryptocurrency market, including Bitcoin. At the same time, the European Central Bank also stated that it would maintain a tight monetary policy to cope with inflationary pressures.
