Bitcoin Price Plunge Sparks Speculation: Could a Record High Be Near?
Bitcoin Price Drops – Bitcoin’s price fell over 25% during the global market turmoil on August 5. Despite this significant drop, emerging indicators suggest that the decline might be a bear trap, potentially setting the stage for a new record high in 2024.
Technical Indicators Reveal Weakening Downward Momentum
Recent data highlights a bullish divergence in Bitcoin’s price on weekly charts. Since July, while Bitcoin (BTC) has formed lower lows, the weekly relative strength index (RSI) has registered higher lows. This divergence suggests that the downward momentum is weakening, and a potential upside reversal may be near. Confirming these bullish divergences with additional technical indicators is crucial to avoid false signals.
Last week, Bitcoin formed what appears to be a long-legged Doji candlestick. This pattern, emerging after a strong trend, often signals a potential reversal or a pause before the trend resumes. Coupled with rising trading volumes near the lower trendline of Bitcoin’s bull flag pattern, this Doji formation indicates a strong conviction among traders for a potential price rebound. If Bitcoin rallies toward the flag’s upper trendline, around $66,500, a significant bullish movement could occur by September.
Bull Flag Patterns and Potential Price Surge
Bull flags are typically continuation patterns, and a strong close above the flag’s upper trendline could trigger a rally. This could push Bitcoin’s price up by an amount equal to the size of the previous uptrend before the flag formation. The confluence of the bull flag pattern, Doji candlestick, and bullish divergence signals could propel BTC to surpass $79,000, setting a new record high in the coming months.
Whale Activity Supports Bitcoin’s Bullish Outlook
Onchain data reveals increased accumulation by Bitcoin whales, defined as entities holding at least 1,000 BTC. According to Glassnode, these whales have withdrawn the most Bitcoin from exchanges since 2015, marking the largest surge in nearly a decade. Over the past 30 days, approximately 73,350 BTC has left whale exchange balances. Such withdrawals are interpreted as a bullish sign, indicating that whales prefer holding onto their BTC rather than converting it into other cryptocurrencies or fiat.
The last significant withdrawal surge by Bitcoin whales occurred in 2015 when BTC was trading around $220, preceding a massive bull run that drove the price to $20,000 by December 2017.
Macroeconomic Factors and Federal Reserve Expectations
Macroeconomic indicators further bolster Bitcoin’s bullish reversal outlook. As of August 12, CME data shows 100% confidence in a U.S. Federal Reserve rate cut in September. The probability of a 25 basis point (bps) rate cut is now 51.5%, compared to 15% a week earlier. The remainder anticipates a 50 bps rate cut, which is a bullish sign for Bitcoin.
Key CPI Data and Market Uncertainty
The upcoming week is crucial for understanding the Federal Reserve’s interest rate outlook, with the U.S. producer and consumer price reports for July set to be released on August 14. Rising inflation could deter Fed Chair Jerome Powell from raising rates in September, presenting downside risks for Bitcoin and the broader crypto market.
The crypto market opens this week with a standoff between bulls and bears, reflecting uncertainty around the August 14 inflation data. Fed Governor Michelle Bowman’s hawkish comments, indicating reluctance to support a rate cut in September, add to the market’s cautious sentiment. Bowman stated on August 10:
“While progress in lowering inflation during May and June is a welcome development, inflation remains uncomfortably above the committee’s 2% goal,” and added, “I will remain cautious in considering adjustments to the current stance of policy.”
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