Bear market fractals, shaky technical indicators, and macrorisks continue to warn that Bitcoin is due for more suffering.

On August 20, Bitcoin (BTC) made a slight recovery, but it was still expected to record its worst weekly performance in the previous two months.

Bitcoin displays bottom signal

The price of BTC increased 2.58% to $21,372 per token on the daily chart, but it was still down almost 14.5% for the week as a whole, its lowest weekly performance since mid-August. Nevertheless, several on-chain signals imply that Bitcoin’s correction phase may be reaching its conclusion.

This contains Hash Ribbons, a statistic used to assess whether miners are operating in accumulation or capitulation mode by monitoring the hash rate of Bitcoin. For the first time since August 2021, the indicator as of August 20 indicates that the miners’ surrender is done, which might cause the price momentum to change from negative to positive.

However, despite a flurry of current negative signs, including unfavorable technical setups and its persistent vulnerability to macrorisks, Bitcoin has been unable to overcome them. Consequently, a negative continuation cannot be ruled out despite positive on-chain data.

Here are three reasons why the market bottom for bitcoin may still be a ways off.

Breakdown of the rising wedge in BTC price

This week’s price drop in bitcoin has resulted in a rising wedge breakdown, which portends further losses for the cryptocurrency in the weeks ahead.

Rising wedges are bearish reversal patterns that develop as price moves upward within a contracting, ascending channel but resolve after it breaks downward, which might cause a drop to as low as the maximum wedge’s height.

The rising wedge breakdown goal on the BTC chart above is $17,600 when technical considerations are applied. In other words, by September, the price of Bitcoin may have decreased by about 25%.

Bitcoin bulls misinterpret the Fed

After bottoming out locally at about $17,500 in June, the price of bitcoin increased by almost 45% during the creation of a rising wedge.

It’s interesting to note that the time when Bitcoin saw upward movement also happened to correspond with investors’ rising belief that inflation has peaked and that the Federal Reserve will begin lowering interest rates as early as March 2023.

The expectations were raised by Fed Chairman Jerome Powell’s July 27 FOMC statement.

“As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.”

However, the most recent Fed dot plot reveals that the majority of experts believe that rates would rise to 3.75% by the end of 2023 before falling to 3.4% in 2024. Therefore, the likelihood of rate decreases is still hypothetical.

James Bullard, president of the St. Louis Federal Reserve, also stated that he would back a third straight 75 basis point increase at the central bank’s policy meeting in September. The declaration is consistent with the Fed’s pledge to reduce inflation from its current rate of 8.5% to 2%.

In other words, pressure on Bitcoin and other risky assets, which entered a bear market after the Fed started an aggressive tightening cycle in March, should continue for the foreseeable future.

History serves as a guide

Given the asset’s history of such recoveries during weak markets, the current Bitcoin price recovery runs the risk of being misinterpreted as a bullish indicator.

During the 2018 bear market cycle, the price of BTC increased by about 100%, rising from roughly $6,000 to over $11,500, only to completely wipe all the profits and fall to around $3,200. Notably, comparable corrections and rebounds also occurred in 2019 and 2022.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of OCMX. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Leave your thoughts in the comments below.

Leave a Comment

Bitcoin (BTC) $ 23,840.39
Ethereum (ETH) $ 1,671.26
Tether (USDT) $ 1.00
USD Coin (USDC) $ 1.00
Solana (SOL) $ 24.99
XRP (XRP) $ 0.41534
Cardano (ADA) $ 0.401191
Polkadot (DOT) $ 6.52
Dogecoin (DOGE) $ 0.093948
Shiba Inu (SHIB) $ 0.000012
Terra Luna Classic (LUNC) $ 0.000173
Avalanche (AVAX) $ 21.96
Polygon (MATIC) $ 1.22
TRON (TRX) $ 0.063657
Ethereum Classic (ETC) $ 22.45
VeChain (VET) $ 0.024721
ApeCoin (APE) $ 6.18
Tezos (XTZ) $ 1.11
BitTorrent (BTT) $ 0.00000074848554
Holo (HOT) $ 0.002215
Binance USD (BUSD) $ 1.00
LINK (LN) $ 43.30
SXP (SXP) $ 0.306679