Despite recent volatility and a dip to five-month lows, Bitcoin (BTC) shows promising signs that bullish sentiment could prevail, suggesting a potential rebound in its price trajectory.
Bitcoin encountered a turbulent start this month, sliding by over 10.50% to hover around $57,000 as of July 7. At its lowest point, BTC touched $53,550, influenced by concerns over Mt. Gox’s ongoing reimbursement of 140,000 BTC to clients and BTC liquidations by the German government.
However, amidst the price decline, significant indicators suggest a potential turnaround. The relative strength index (RSI) has shown a notable divergence, rising despite the falling prices, indicating weakening selling pressure amidst the slump.
In technical analysis, such divergences often precede reversals or slowdowns in downtrends, suggesting a possible impending rebound for Bitcoin as market sentiment shifts towards optimism.
Supporting this bullish outlook are two classic technical signals. Firstly, Bitcoin formed a bullish hammer candlestick pattern on July 5, similar to patterns observed in May, which typically foreshadows a potential price reversal. Secondly, the daily RSI for Bitcoin is hovering near the oversold threshold of 30, historically signaling periods of consolidation or recovery. Analysts, including Jacob Canfield, anticipate this could lead BTC back towards its previous highs above $70,000.
Moreover, Bitcoin’s prospects are bolstered by increasing expectations of a September interest rate cut by the Federal Reserve, with Wall Street traders now pricing in a 72% likelihood, up from 46.60% a month earlier. This shift follows a slowdown in U.S. hiring, prompting expectations of economic stimulus through lower interest rates, which tends to favor riskier assets like Bitcoin.
Further reinforcing positive sentiment, U.S.-based Spot Bitcoin exchange-traded funds (ETFs) have resumed attracting inflows after two days of outflows. On July 5, following weak U.S. unemployment data, these funds collectively received $143.10 million in BTC investments, signaling renewed confidence among institutional investors.
Notably, the Fidelity Wise Origin Bitcoin Fund (FBTC) led the inflows with $117 million, alongside contributions from Bitwise Bitcoin ETF (BITB), ARK 21Shares Bitcoin ETF (ARKB), and VanEck Bitcoin Trust (HODL). In contrast, the Grayscale Bitcoin Trust (GBTC) experienced a net outflow of $28.6 million.
Additionally, a recent uptick in the U.S. M2 money supply, which measures liquid assets such as cash and checking deposits, supports Bitcoin’s bullish case. Increased liquidity tends to drive investments into riskier assets like Bitcoin, as traditional safe-havens offer lower returns.
Moreover, metrics indicating Bitcoin miner capitulation nearing levels last seen after the FTX crash in late 2022 suggest a potential price floor for BTC. Miner capitulation, evidenced by declining hashrates and operational adjustments, historically precedes market recoveries, signaling a possible stabilization phase for Bitcoin.
In summary, while these indicators suggest a positive outlook for Bitcoin, readers are reminded that all investments carry inherent risks. Individuals should conduct thorough research and exercise caution when making investment decisions.