Bitcoin (BTC) begins the second week of July on a risky note, with investors concerned about further declines in the BTC price.
BTC/USD is hitting its lowest weekly close in four months, giving bulls a nightmare as unrealized losses mount and bigger hits are expected to come.
Where will the market ultimately go?
The trading community, already shocked by the scale of recent losses, is nonetheless bracing for lower levels. Historically, the current decline is still small, leaving the path open for a trip to $50,000 or lower.
With this unpleasant situation in mind, long-time market participants are watching to see how major players weather the storm.
The focus is on a diverse group of investors: speculators and some of Bitcoin’s “diamond hands” are currently holding the asset.
The downtrend appears to have been driven by a combination of selling by the U.S. and German governments and the repayment of bitcoin debt owed to creditors of the shuttered exchange Mt. Gox.
The sentiment highlights the market’s sensitivity to the topic. The Crypto Fear & Greed Index, which fell 60% last month, indicates “extreme fear.”
Amid ongoing uncertainty over how these forces will play out, Cointelegraph looks at different opinions on how BTC price action will react.
Bitcoin: More Downside Likely “Probable”
Bitcoin looked set to rally again over the weekend, with the price bouncing back above $5,000 from previous lows, giving investors hope.
But everything changed at the end of the week. According to data from Cointelegraph Markets Pro and TradingView, BTC/USD recovered to $54,300 and traded about $2,000 higher as volatility increased.
“With Bitcoin closing the week below its May low, Friday’s strength makes us more likely to see a dead cat bounce and sustained decline in the coming weeks,” popular commentator Mark Cullen wrote as part of a gloomy response to X (formerly Twitter).
Market research firm Santiment highlighted the extent of underperformance across both Bitcoin and altcoins.
“After a brief rally that raised traders’ expectations, cryptocurrencies saw a fear-inducing pullback again towards the end of the weekend. Bitcoin was down -2.3% in the last 24 hours, -8.6% in the last week, and -18.4% in the last month,” he summarized.
“Most altcoins showed much larger declines.”
According to popular trader Tony “The Bull” Severino, it’s time to brace for the shock.
“Bitcoin closed below its lower Bollinger Bands on the weekly chart,” he warned, along with a chart showing the Bollinger Bands volatility indicator.
“This is a sell signal. There is a high probability that there will be more downtrend.”
Matthew Hyland, a trader and commentator known for his usually optimistic price outlook, had similar news for his X followers.
“BTC has confirmed a weekly breakdown from a consolidation range that has been in place for months,” he admitted.
“BTC is still in an uptrend and needs to break below $38,000 to end the uptrend, so the uptrend is still fully intact, but this weekly breakdown opens the door to lower price targets.”
BTC price target below $50,000 depends on RSI.
Traders were divided on where BTC/USD might bottom during the recent correction.
As Cointelegraph reported, $45,000 is emerging as one of the most popular assumptions, following a decline from past highs.
“Bitcoin’s weekly close was ugly,” wrote Keith Alan, co-founder of trading resource Material Indicators, on the topic.
“There are a lot of rumors that a bottom has come in at CT, but we don’t see any verified confirmation of that yet. A retest of support would give us the confirmation we are looking for, but I’m not sure if $53.5k will hold.”
Allen, along with Hyland, showed the Relative Strength Index (RSI) as a signal that Bitcoin is truly “oversold” at current levels.
“I’m watching the weekly RSI very closely,” he confirmed, along with a chart of one of Material Indicators’ proprietary trading tools showing potential bounce zones.
“If the weekly RSI fails to hold 42, pack your bags for a trip to Bearadise.”
As of July 8th, when this article was written, the weekly RSI was at 45.6, and Hyland sees the possibility of even lower readings ahead.
He noted that “the weekly RSI has fallen almost to its lows from August/September last year when BTC was trading at 25,000.”
“If another red weekly candle appears, the RSI is likely to go lower, which would create an opportunity for a bullish divergence.”
Meanwhile, veteran trader Peter Brandt, recalling the specter of 2021, entertained the idea that Bitcoin’s recent highs were part of another “double top” formation.
Although it is not yet confirmed, he predicted a target price of $44,000 if BTC/USD continues to decline.
Bitcoin Speculators in the Red
Last week there were a lot of liquidations between traders who were long and short, but other traders had no choice but to sit and wait.
A significant portion of the Bitcoin investor base is currently running out of Bitcoin holdings.
Axel Adler Jr., a contributor to on-chain analytics platform CryptoQuant, said that this could be a time bomb as he analyzed the unrealized P&L.
“There is a bit of panic in the market due to the small sell-off in Mt. Gox/Govt coins, but no one is talking about the unrealized losses of STH whales, which are currently at 218K BTC. I have no idea what will happen to the market if they lose their nerve,” he warned on X.
The attached chart shows the unrealized P&L of short-term holder whales (STH). Short-term holder whales are large institutions that hold a certain unit of BTC for 155 days or less.
On the broader topic of STH, with the current cost base around $64,000 and the overall deficit, CryptoQuant contributor Mignolet offered a glimmer of hope.
He noted that the Consumed Output Profit Ratio (SOPR) of the cohort, which monitors on-chain transaction profitability, now reflects the behavior seen 10 months ago.
“If the current cycle is still in a bullish phase and not out of season, then the short-term SOPR data suggests that prices are nearing a bottom. This pattern is very similar to the period in September last year,” he said in one of CryptoQuant’s Quicktake blog posts.
CPI, PPI, Fed Powell Line Up
Bitcoin investors had plenty to be concerned about this week, but a flurry of macroeconomic data over the next few days will test the risk asset’s resolve.
The US Consumer Price Index (CPI) and Producer Price Index (PPI) for June will be released on July 11-12.
Inflation remains a major topic in market sentiment, as Federal Reserve Chairman Jerome Powell testified before the Senate.
With the Federal Reserve’s next meeting scheduled to decide on interest rate moves in about three weeks, the upcoming data will be important in assessing the overall mood.
“Fasten your seatbelts for a busy week ahead,” trade intelligence agency The Kobeissi Letter predicted for X.
Still, the latest estimates from CME Group’s FedWatch tool show there’s little chance the Fed will change rates in July, with just a 6.7% chance.
As we have seen, unexpected macroeconomic data results can impact cryptocurrency market trends.
“We’ll have to wait and see what happens with the CPI data this week and others… but until they don’t, I’m still betting it’s going to be lower,” commentator Cullen concluded.
Emotions reverse bullish trend
The Cryptocurrency Fear and Greed Index is now back at the start of the Bitcoin bull run.
Related: Government Bitcoin Sales Account for Just 4% of $225 Billion Bull Market Inflows – Analyst
Despite BTC/USD falling 25% from its all-time high since March, the classic sentiment indicator has shifted from “extreme greed” to “extreme fear” over that period.
As of July 8, the index stood at 28 out of 100, down about 50 points from last month and hitting its lowest level since early 2023.
But the irony lies with popular trader Moustache, who is one of the increasingly rare voices in the trading community who has a positive voice.
Bitcoin is circling its first all-time high of 2021, and sentiment is sky-high.
“The Crypto Fear & Greed Index is showing ‘fear’ while $BTC is retesting its 2021 ATH. Just like 2017… just like 2020,” he said in late June, drawing a historical comparison.
“I don’t think there could be a more bullish signal than this.”
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.