Bitcoin finds itself in a precarious position as it enters the second week of July, with traders feeling fearful of further price drops. After experiencing its lowest weekly close in four months, Bitcoin is causing anxiety among bulls as unrealized losses accumulate and predictions of more pain ahead emerge. The trading community, already taken aback by the extent of recent losses, is prepared for even lower levels. Despite the current drawdown being relatively small historically, there is a possibility that Bitcoin could drop to, or even below, $50,000. Longtime market participants are closely observing major players to see how they navigate through this storm. Various investor cohorts, including speculators and some of Bitcoin’s committed holders, find themselves underwater on their holdings. The current downtrend seems to be a result of selling by the United States and German governments, as well as the reimbursement of Bitcoin owed to creditors of Mt. Gox, a defunct exchange. The market sentiment reflects the sensitivity to these factors, as the Crypto Fear and Greed Index has plummeted 60% over the past month and is currently indicating “extreme fear.” As uncertainty lingers about the outcome of these influences, industry experts offer their perspectives on how Bitcoin’s price strength might respond. Some analysts believe that more downside is likely, with the recent bounce from prior lows being viewed as a temporary recovery before further decline. Traders are closely watching the weekly close and the Relative Strength Index (RSI) for signs of oversold conditions. The RSI readings are approaching levels seen during Bitcoin’s lows in August and September of last year, indicating the possibility of further decline. Veteran trader Peter Brandt suggests that Bitcoin’s recent all-time high may have formed a “double top” pattern, which could lead to a target price of $44,000 if the breakdown continues. Meanwhile, a significant portion of Bitcoin investors find themselves underwater on their holdings. The unrealized losses of short-term holder whales currently amount to 218,000 BTC, which could potentially impact the market if they decide to sell. On the bright side, the spent output profit ratio (SOPR) for short-term holders is showing similarities to a bullish phase experienced in September last year, indicating that the price may be nearing its bottom. In addition to these market factors, upcoming macroeconomic data, such as the US Consumer Price Index (CPI) and Producer Price Index (PPI), and testimony from the Federal Reserve chair Jerome Powell, will also play a role in assessing the overall climate. Traders are advised to stay cautious and conduct their own research before making any investment decisions. Despite the current market conditions, it’s worth noting that sentiment can quickly change, as seen by the Crypto Fear and Greed Index, which has shifted from “extreme greed” to “extreme fear” in just a few months.
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