Markets
Bitcoin (BTC) Bulls Fail Again After US Consumer Price Index Surprises Market: What Next?
Thursday was a significant day for cryptocurrency markets as bitcoin (BTC) failed to break out of a key resistance despite a positive US inflation report, maintaining the downward trajectory observed since early June.
On Thursday, after the US reported its first drop in consumer prices in four years, markets quickly upped the stakes on the Fed’s rate cut, flocking to high-risk assets including BTC.
For a moment, it looked like bitcoin bulls would establish a foothold above the descending trend line, typifying the sell-off from June highs near $72,000. Such a move would signal the end of the pullback and could attract momentum traders, as discussed in Thursday’s First Mover America.
However, bullish hopes were quickly dashed as prices began to slide from trendline resistance, dropping below $57,000 in the early hours of today.
The latest failure to rally, seen against the backdrop of positive macroeconomic news flow, could mean further price weakness ahead. A similar rejection of the trend line on July 1 proved costly, deepening the sell-off.
However, there is hope for the bulls. The daily chart’s MACD histogram, an indicator used to gauge trend strength and changes, is teasing a crossover above zero, a sign of an impending bullish shift in momentum.
The oversupply from the German state of Saxony, which catalyzed the price decline earlier this month, is nearly exhausted. Furthermore, it remains uncertain what percentage of the 95,000 BTC, which represents a portion of the total 140,000 BTC scheduled to be distributed to Mt. Gox creditors, will be liquidated.
“The prospect of some of the $16.3 billion FTX redemption in the coming months translating into buying pressure, the increasingly positive sentiment towards cryptocurrencies on both sides, and the potential for a September interest rate cut benefiting risk assets in general should encourage bulls in the medium to long term,” leading cryptocurrency broker FalconX said in a newsletter on Friday.
FalconX added that the potential sale by Mt. Gox lenders could have a different profile than the Saxony sales. “For example, perhaps more flow will go to exchanges versus professional liquidity providers, or perhaps a more diverse shareholder base will emerge from the selloff over time,” FalconX noted.