Financial analyst Yashu Gola in Mumbai wrote on Monday (July 8th) that the price of Bitcoin is offsetting concerns about Mt. Gox due to favorable macroeconomic factors, but some analysts predict that Bitcoin's price may fall below $50,000 in the coming weeks.
A series of unfavorable events in the Bitcoin market has caused turmoil, such as Mt. Gox's repayment of 0.14 million Bitcoin to creditors and Germany's ruthless Bitcoin liquidation. These two factors have increased the possibility of billions of dollars of Bitcoin being sold, which has caused traders to doubt whether there will be more downside in the Bitcoin market after falling 15% in the first week of July.
Analyst: Bitcoin will fall below $38,000
Independent market analyst Matthew Hyland has confirmed that Bitcoin's downside price target is under $38,000.
In Hyland's X-post on Monday, he cited Bitcoin's breakout from a several-month consolidation range on the weekly chart to support his bearish view and pointed out that the possibility of the cryptocurrency returning to the same range is low.
(source: Matthew Hyland)
Bitcoin's weekly relative strength index (RSI) reading is around 45, which further confirms the bearish outlook.
This RSI level indicates that both buyers and sellers do not control the market. However, the current downtrend in the market indicates that the RSI still has more downside potential, at least before reaching the oversold threshold of 30, which usually signals a rebound in price.
Similarly, Bitcoin could continue to fall until the RSI reaches an oversold reading of 30, which may coincide with Hyland's downside target (below $38,000).
Hyland reminded, "The weekly RSI has fallen almost to its low point in August/September last year when BTC traded at $25,000," and added:
"Another red weekly candle may push RSI lower, providing an opportunity for bullish divergence."
Is $50,000 Bitcoin's next bottom?
Anonymous market analyst Stockmoney Lizards also expects Bitcoin's price to continue to plummet. However, his downside target is around $50,000.
The chartist cited the so-called "Bat Harmonic" pattern to explain his limited bearish bias. The pattern starts with the initial price trend (XA), followed by the retracement (AB), another trend (BC), and finally the final trend (CD) that extends to 88.6% of the XA trend.
(source: Stockmoney Lizards)
Point D is the key area where traders expect a reversal, which is usually confirmed by other signals such as candlestick charts or trading volume. As for Bitcoin, point D coincides with the level of $50,000, and the price may rebound significantly thereafter.
Stockmoney Lizards explained, "We are waiting for another liquidity surge, which may establish long-term support below 50k, in order to establish support at 52k," and added: "Daily RSI and other indicators are overbought, but we believe there is still some downside potential. Ideally, we will consolidate at 52k, forming a high-volume bullish divergence, which will be our reversal signal."
The macroeconomic outlook for BTC prices
Supportive economic data from the United States, especially Wall Street's bet on a rate cut in September, helped ease the bearish outlook for Bitcoin during the current adjustment period.
According to the Chicago Mercantile Exchange (CME), as of July 8th, futures interest traders' expectations of a 25 basis point rate cut in September have risen from 46.6% a month ago to about 67.3%. After the disappointing US employment data released on June 5th caused short-term yields to plummet, this shift towards a more moderate outlook has further strengthened.
Chart showing the daily performance of 2-year and 5-year Treasury bond yields in the United States. Data source: TradingView.
The decline in yields lowered the opportunity cost of holding safer investment assets such as US bonds. Instead, it stimulated demand for riskier assets such as cryptos and stocks. At the close of June 5th last week, both the S&P 500 index and the Nasdaq index hit record highs.
Bitcoin has also caught up with this wave of growth, reversing the downward trend led by Mt. Gox and the German government. Bitcoin rose 7% from its low point of $53,550 on June 5th. Meanwhile, the value of $0.398 billion worth of inflows into Bitcoin investment funds, including exchange-traded funds (ETFs), was recorded each week.
Net inflows of cryptocurrency funds as of the week ending on July 5th. Source: CoinShares.
James Butterfill, a researcher at asset management firm CoinShares, said, "The total inflow into digital asset investment products reached $0.441 billion, and the recent price weakness caused by selling pressure from Mt. Gox and the German government may be seen as a buying opportunity."
Favorable macroeconomic catalysts, coupled with the inflow of funds into Bitcoin funds, provide a positive technical backdrop. It should be noted that BTC is currently testing its months-long uptrend line support and is expected to rebound significantly towards its months-long horizontal trendline resistance level (approximately $71,500) in the third quarter of 2024.
Data source: TradingView.
On the contrary, breaking below the uptrend line support may lead to a fall to the 0.786 Fibonacci retracement level (approximately $51,500), which is closer to the analysis of the above-mentioned Stockmoney Lizards.