Bitcoin price fell more than 25% during the global market crash on August 5. However, new signals suggest that this decline could be a bear trap, and prices could head back to new all-time highs in 2024.
Bitcoin’s Downward Momentum Weakens
Bitcoin (BTC) price is showing signs of a bullish divergence on the weekly chart.
More specifically, the price of BTC has been forming lower lows since July. On the other hand, the weekly Relative Strength Index (RSI) has been forming higher lows. This divergence indicates that the downside momentum is weakening and a potential upside reversal could be imminent.
It is important to identify bullish divergences from other technical indicators to avoid false signals, which is why Bitcoin appears to have formed a long-legged doji candlestick last week.
When this pattern appears after a strong trend (either up or down), it may indicate that the trend may be reversing, or at least pause before continuing.
The Doji candlestick formation, along with the increasing volume near the lower trendline of Bitcoin’s bullish flag pattern, indicates strong trader confidence in a potential price bounce. This suggests that Bitcoin could rally towards the upper trendline of the flag, around $66,500, by September.
Since bull flags are usually bullish continuation patterns, a strong close above the upper trendline of the flag may start a rally. Then, prices may rise by the same amount as the previous uptrend before the flag was formed.
In other words, the confluence of a bullish flag, doji candlestick, and bullish divergence signal could help BTC price break out to a new all-time high of $79,000 in the coming months.
Bitcoin Whales Are Gathering Again
Bitcoin’s bullish reversal signal is receiving additional support from on-chain data tracking the wealthiest investors, also known as “whales.”
According to Glassnode, Bitcoin whales holding at least 1,000 BTC have withdrawn the most Bitcoin from exchanges since 2015, marking the largest increase in nearly a decade. Over the past 30 days, approximately 73,350 BTC have left whale exchange balances.
The market interprets the surge in Bitcoin withdrawals from exchanges as a bullish indicator, as institutions are willing to hold BTC for longer than they would sell it for other cryptocurrencies or fiat currencies.
The last time Bitcoin whales withdrew this much from exchanges was in 2015, when BTC was trading around $220. This was preceded by a massive bull run that ultimately pushed the price of BTC to $20,000 by December 2017.
Bond traders are 100% confident of September rate cut
Macroeconomic indicators are further strengthening the bullish reversal outlook for Bitcoin.
As of August 12, CME data showed 100% confidence that the US Federal Reserve will cut rates in September. The odds of a 25bp cut are now 51.5%, up from 15% a week ago. The rest are expecting a 50bp cut, which is a bullish signal for Bitcoin.
All eyes are on CPI data
This week is crucial to understanding the Fed’s interest rate outlook, with the July U.S. Producer and Consumer Price Report due on August 14. If there are signs of rising inflation, Fed Chair Jerome Powell may not raise rates in September, which could pose downside risks to Bitcoin and the broader crypto market.
Related: Bitcoin Price Drops Below $59,000 as Institutions Stop Buying Stablecoins
Cryptocurrency markets started the weekly session in a bullish-bearish deadlock, indicating uncertainty over inflation data on August 14. The deadlock was further exacerbated by hawkish comments from Federal Reserve Chair Michelle Bowman, who indicated she would not support a rate cut at the September meeting.
“The progress toward lowering inflation during May and June was welcome, but inflation remains uncomfortably above the Committee’s 2 percent objective,” she said in a speech to the Kansas Bankers Association in Colorado Springs on Aug. 10, adding:
“I will maintain a cautious approach in considering adjustments to my current policy stance.”
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.