According to 10x Research: Bitcoin is on the brink of a potential rally as traders eye the shifting odds in the upcoming U.S. election and a slightly favorable risk-on environment. However, the cryptocurrency remains within its triangle formation, and significant risks could lead to a correction later in September before a possible rebound by year-end.
1. Charting the Rally: Indicators Show Promising Momentum
Bitcoin's price failed to break out of its triangle formation yesterday, but all three reversal indicators suggest a strong rebound. Momentum is outpacing slower-moving averages, a sign that market technicals are improving. Analysts see a rally toward $65,000 as within reach, but the direction of the triangle breakout remains critical. Risk management is essential as the market remains in a precarious position.
2. Limited Long Exposure and Derivatives Stability
Following sharp declines around the August 5 crash, there's limited long exposure in perpetual futures. Ethereum's open interest has remained relatively unchanged, while Bitcoin's small short position could be covered, potentially pushing prices higher. Unlike late July, when overleveraged positions led to a correction, derivatives positions are no longer overextended.
3. Equities Rally Could Boost Bitcoin
While there are no immediate fundamental catalysts in the crypto space, the positive momentum from the U.S. equity market could spill over into Bitcoin. U.S. corporations are repurchasing shares at a rate of $6.6 billion per day, a trend expected to continue until the earnings blackout period aligns with the next FOMC meeting on September 18.
4. Fed Minutes and Jackson Hole: Key Events to Watch
The Fed minutes from the last FOMC meeting, released today, are expected to confirm discussions about lowering interest rates. A dovish stance from the Fed could spark a rally in both stocks and Bitcoin. Fed Chair Powell's upcoming speech at Jackson Hole on August 23 is also anticipated to signal the Fed's readiness to cut rates, which could further fuel a Bitcoin rally.
5. Election-Linked Risks and Potential Bitcoin Volatility
The Kamala Harris–Trump debate on September 10 poses a significant risk event for the markets. Bitcoin saw a strong rebound in mid-July following favorable CPI data and the attempted assassination of Trump. However, with Biden withdrawing from the race, Trump's odds plummeted, and Bitcoin's rally lost momentum. The election's outcome remains uncertain, and Harris's potential victory could significantly impact risk sentiment.
6. Short Squeeze and Technical Breakout on the Horizon
Technical indicators are improving, and with some traders holding short positions, there’s potential for a short squeeze. The favourable risk-on environment could extend to Bitcoin as equity markets face upside risks due to corporate buybacks and CTAs (trend models) rebuilding long positions. However, traders must closely watch the triangle pattern—a breakout in either direction is imminent.
In summary, Bitcoin is positioned at a critical juncture, with potential for a tactical rally driven by a combination of technical momentum, shifting election odds, and a dovish Fed stance. However, significant risks loom, and traders must remain vigilant as the market navigates through a complex landscape of macroeconomic and political factors.
