bitcoin

3 Reasons Bitcoin’s Lowest Price Isn’t Here


Bitcoin (BTC) rallied slightly on August 20, but remained on track to post its worst weekly performance in the past two months.

Bitcoin Hash Ribbons Flash Lower Signal

On the daily chart, the price of BTC climbed 2.58% to $21,372 per token, but was still down nearly 14.5% since the start of the week, its worst weekly returns since mid- august. Nevertheless, some on-chain indicators suggest that Bitcoin’s correction phase may be coming to an end.

This includes Hash Ribbons, a metric that tracks Bitcoin’s hash rate to determine if miners are in accumulation or capitulation mode. As of August 20, the metric shows that the miner capitulation has ended for the first time since August 2021, which could turn the price momentum from negative to positive.

Bitcoin hash tape. Source: Glassnode

Nonetheless, Bitcoin was unable to ignore a flurry of prevailing negative indicators, ranging from negative technical setups to its continued exposure to macro risks. Therefore, despite on-chain optimistic measures, a bearish continuation cannot be ruled out.

Here are three reasons why Bitcoin’s market bottom may not yet have been reached.

BTC Price Rise Wedge Crashes

Bitcoin’s price drop this week has triggered a rising spread in the coin, suggesting more losses for the crypto in the coming weeks.

Ascending wedges are bearish reversal patterns that form after price rises inside a contracting ascending channel, but resolve after price breaks out of it on the downside, which could lead to a reversal. drop as low as the maximum height of the bevel.

BTC/USD daily price chart showing an “ascending wedge” pattern. Source: Trading View

Applying the technical principles of the BTC chart above presents $17,600 as the rising wedge allocation target. In other words, the price of Bitcoin could drop around 25% by September.

Bitcoin bulls misjudge the Fed

Bitcoin had jumped around 45% during its rising wedge formation, after hitting a local low at around $17,500 in June.

Interestingly, the period of Bitcoin bulls coincided with growing investor expectations that inflation had peaked and the Federal Reserve would begin cutting interest rates as early as March 2023.

Expectations emerged from Fed Chairman Jerome Powell’s FOMC statement on July 27.

Powell:

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

Nonetheless, the latest dot chart from the Fed shows that most officials expect rates to hit 3.75% by the end of 2023 before falling back to 3.4% in 2024. rates remain speculative.

Fed funds implicit target rate. Source: Federal Reserve

St Louis Fed President James Bullard also signaled he would back a third consecutive 75 basis point hike at the central bank’s policy meeting in September. This statement is in line with the Fed’s commitment to bring inflation down to 2% from its current level of 8.5%.

Related: Options Data Shows Bitcoin’s Short-Term Uptrend Is Threatened If BTC Falls Below $23,000

In other words, Bitcoin and other risky assets, which fell into bearish territory when the Fed began an aggressive tightening cycle in March, are likely to remain under pressure for the next few years.

If history is any indicator…

The ongoing rally in Bitcoin price risks turning into a false bullish signal given the asset’s similar bounces in previous bear markets.

BTC/USD weekly price chart. Source: Trading View

BTC’s price rebounded nearly 100% from around $6,000 to over $11,500 during the 2018 bear market cycle, only to then erase the gains entirely and drop to $3,200. Notably, similar bounces and corrections also took place in 2019 and 2022.

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