Despite Bitcoin (BTC) experiencing significant price volatility and reaching five-month lows, various indicators suggest that bullish sentiment could prevail, potentially signaling a rebound in BTC’s price trajectory.
BTC began the month on a tumultuous note, dropping by over 10.50% to settle around $57,000 by July 7. Its lowest point touched $53,550, impacted by concerns over a potential market sell-off linked to Mt. Gox’s ongoing reimbursement of more than 140,000 BTC to clients and the German government’s BTC liquidations.
The recent decline in Bitcoin’s price coincided with a divergence where the relative strength index (RSI) showed an uptrend while prices fell. This divergence typically indicates a weakening selling pressure despite the continuing price downturn, a pattern often associated with potential reversals or slowdowns in downtrends in technical analysis. Such conditions suggest a possible future BTC rebound as market sentiment shifts towards optimism.
Two classic technical indicators further support this bullish reversal scenario. Firstly, Bitcoin formed a bullish hammer candlestick pattern on July 5, characterized by a small body near the day’s high, a long lower shadow, and a minimal upper shadow, reminiscent of a similar pattern observed in May. Secondly, Bitcoin’s daily RSI is hovering close to the oversold threshold of 30, which historically precedes periods of consolidation or recovery. Analyst Jacob Canfield suggests this could pave the way for BTC to retest its previous high above $70,000.
Furthermore, Wall Street is increasingly betting on a September interest rate cut, with traders on July 7 indicating a 72% probability of the Federal Reserve reducing rates by 25 basis points, up from 46.60% a month earlier. This shift is partly driven by a slowdown in U.S. hiring, a trend that typically prompts the Fed to consider rate cuts to stimulate economic activity. Lower interest rates generally favor riskier assets like Bitcoin over traditional safe havens such as U.S. Treasury bonds.
In the realm of Bitcoin ETFs, there has been a notable resurgence in inflows into U.S.-based Spot Bitcoin ETFs following two consecutive days of outflows. On July 5, amid weak U.S. unemployment data, these funds collectively attracted $143.10 million worth of BTC, reflecting a growing risk appetite among institutional investors.
The Fidelity Wise Origin Bitcoin Fund (FBTC) led with $117 million in inflows, followed by the Bitwise Bitcoin ETF (BITB) with $30.2 million, and the ARK 21Shares Bitcoin ETF (ARKB) and VanEck Bitcoin Trust (HODL) with inflows of $11.3 million and $12.8 million, respectively. In contrast, the Grayscale Bitcoin Trust (GBTC) experienced a net outflow of $28.6 million.
Another positive signal for Bitcoin stems from an increase in the U.S. M2 money supply, which expanded by approximately 0.82% year-over-year as of May 2024. This growth, reducing from a peak decline of 4.74% in October 2023, enhances liquidity in the economy, potentially driving higher investments in riskier assets like Bitcoin.
Moreover, metrics related to Bitcoin miner capitulation suggest that the market may be nearing a bottom for BTC prices. Miner capitulation, marked by reduced operations or selling of mined Bitcoin, has been evident recently amid a notable decline in Bitcoin’s hashrate, dropping by 7.7% to a four-month low of 576 EH/s after a record high in April. This trend indicates financial strain within the mining community, akin to previous cycles where such stress preceded market recoveries.
In conclusion, while these indicators suggest potential for a BTC price resurgence, this article does not offer investment advice. Investors should conduct thorough research and consider their own risk tolerance before making any financial decisions.