Bitcoin’s market structure on the weekly timeframe shows what some analysts have described as a bull flag or broadening wedge pattern, which if completed would send BTC to new all-time highs.
Even with the chart pattern holding form throughout the current price whipsaws, Bitcoin continues to sell off at overhead resistance levels and it remains susceptible to macroeconomic developments.
BTC/USDT weekly chart. Source: TradingView
In this week’s The Week Onchain Newsletter, Glassnode analysts concluded that Bitcoin’s strength was tapering off as the market has been stuck in a “structurally ordered downtrend” for the past 5-months. Among other factors, the analysts cited diminishing interest in leveraged positions in a market that was cooling off from the euphoria induced by the spot Bitcoin ETF launch and BTC hitting new all-time highs above $73,000.
Essentially, the market has reached a point where many of analysts’ long-foretold bullish catalysts were confirmed, and the remaining price breakout catalysts are further out timewise (i.e., market participants desire a Trump presential victory, a resumption in robust spot BTC and ETH ETF inflows, the US Federal Reserve implementing rat cuts and perhaps the restart of quantitative easing further down the road).
Yes, on-chain data shows Bitcoin whales accumulating within the swing lows of the current price range and at face value some technical indicators project a bullish outcome from the current market structure, but are there data points that investors with a strong bullish bias are overlooking?
Let’s take a quick overview of some Bitcoin charts to look at the other side of the coin.
Do lower highs point to a loss of bull market momentum?
On the weekly timeframe, Bitcoin price continues to paint lower highs at each breakout attempt toward the all-time high. Each breakout fails to establish $70,000 as support and contrasting this against the MACD, which has rolled over, suggests that some of the key factors that initially propelled BTC price to successive all-time highs have evaporated.
Regarding the MACD, the MACD fell below the signal line in the weeks following Bitcoin’s all-time high and the separation between the MACD and signal line has widened since. Neither have crossed below 0 (which is a bearish sign) but the post-all-time-high drop in momentum mirror Bitcoins price action and sharp decline in previous market cycles in 2018 and twice in 2021.
BTC/USDT weekly chart. Source: TradingView
Similar outcomes can be observed on the weekly RSI, which has done nothing but descend lower from 88.47 in early March when Bitcoin traded above $73,000 to as low as 44 when the price slipped below $45,000 on Aug. 5. Without belaboring the point, both indicators saw a gradual increase from December 2022 as the market exited oversold conditions, reaching what appears to be a peak when BTC hit $73,000.
This analysis is not suggesting that the bull market is over, or that what is shown on the chart is absolute, especially considering that Bitcoin’s price action and market structure have a history of turning on a dime depending on the nature of macroeconomic and geopolitical events. But in a market where pretty much everyone is expecting six-figure all-time highs, a Trump election victory and the Fed rate cuts to supercharge Bitcoin price, it’s good practice at the least to consider outcomes that are counter to the markets’ bullish bias.
Traders need to pump up the volume
Aggregate volumes have also been in decline, a metric aligned with CryptoQuant’s conclusion that Bitcoin’s Apparent Demand metric has “slowed considerably.”
Bitcoin demand. Source: CryptoQuant
According to CryptoQuant, Apparent Demand is the difference between the daily total Bitcoin block subsidy and the daily change in the amount of Bitcoin that has remained steady for one year or longer.
“Demand has declined from a 30-day growth of 496K Bitcoin, the highest since January 2021, to a current negative growth of 36K currently. As demand slowed, prices declined from ~$70K to a low of $49K.”
Aggregate Bitcoin volumes at exchanges have been in decline since the spot ETF approval euphoria and path to a new all-time high, as shown in the January 2023 to Aug. 30 historical volume chart below.
Bitcoin historical volume at exchanges. Source: Coinglass
Spot demand versus futures driven rallies
Recent Bitcoin price rallies have been futures-driven and beyond range bottom accumulation maneuvers from hodlers and spot ETFs what is the next sustainable demand catalyst in the spot markets?
Popular crypto derivatives analyst Skew does a good job of explaining how sharp price moves to Bitcoin’s range highs are frequently driven by liquidations in the futures markets.
$BTC Market Flow Update$BTC Aggregate CVDs & Delta
Sizeable taker buying has led each impulse higher since the low around $56K
Offside positioning into $61K was met with a high volume short squeeze
- crowded trade got hunted
Currently we have some sell pressure from spot… pic.twitter.com/2vJJEKE2BA
— Skew Δ (@52kskew) August 26, 2024
Looking at the aggregate order book overflow, it's easy to see how spot bids absorb Bitcoin’s sharp downside moves as forced buying occurs during short squeezes, but the absence of sustained spot purchasing continually prevents Bitcoin from overcoming the wall of asks that pop up along the range highs.
BTC/USDT perps. Daily chart. Source: TRDR.io
From the perspective of technical analysis, sure Bitcoin price can ping pong along within the bull flag or broadening wedge structure, providing traders with predictable accumulation, momentum trading, and oversold bounce opportunities in the $52,000 to $48,000 range.
Expected resistance and profit-taking zones lay in the $62,000 to $67,000 range, but beyond the range trading, what traders should really keep an eye out for is a reversal in the trend of declining aggregate volumes, weekly lower highs and range breakouts to the swing highs primarily being the result of short squeezes in the derivatives markets.
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.
