Bitcoin (BTC) has been rocked by a series of negative events, including Mt. Gox repaying 140,000 BTC to creditors and the German government’s ruthless liquidation of BTC. Both factors raise the possibility of a multi-billion dollar BTC sell-off, which has traders wondering if there is more downside to come for the Bitcoin market, which fell 15% in the first week of July.
Bitcoin Could Fall Below $38,000: Analyst
Independent market analyst Matthew Hyland has confirmed that his downside price target for Bitcoin would be below $38,000.
In his July 8 X post, Hyland supported his bearish outlook by citing Bitcoin breaking out of a multi-month consolidation range on the weekly chart, noting that it was unlikely the cryptocurrency would recover into the same range.
The bearish outlook is further strengthened as Bitcoin’s weekly Relative Strength Index (RSI) hits 45.
This RSI level suggests that neither buyers nor sellers are in control. However, the prevailing market downtrend suggests that the RSI has more room to fall, at least until it reaches the oversold threshold of 30, which usually precedes a price bounce.
Likewise, Bitcoin could continue its downtrend until the RSI reaches the overheated selling level of 30, which would likely coincide with Highland’s downside target of $38,000.
“The weekly RSI is almost back to its August/September lows last year when BTC was trading at $25,000,” Hyland reminded, adding:
“If another red weekly candle appears, the RSI is likely to go lower, which would create an opportunity for a bullish divergence.”
Could $50K Be the Next Bitcoin Bottom?
Anonymous market analyst Stockmoney Lizards also expects the Bitcoin price to fall further, but his downside target is around $50,000.
The chartist cites the so-called “Bat Harmonic” pattern behind his limited Gomlisch bias. The pattern starts with an initial price move (XA), followed by a retracement (AB), another move (BC), and a final leg (CD) that extends to 88.6% of the XA leg.
Point D is a key area where traders expect a reversal, often confirmed by additional signals such as candlestick patterns or volume. For Bitcoin, Point D coincides with the $50,000 level, after which the price may recover sharply.
“We are waiting for another liquidity flush with a long wick below 50k likely to establish support at 52k,” Stockmoney Lizards explained, adding:
“The daily RSI etc are already oversold, but we still think there is more downside to go. Ideally we would see a consolidation at 52k and a bullish divergence with high volume. That would be a reversal signal for us.”
Macroeconomic Outlook on BTC Price
Positive economic data coming out of the U.S., especially Wall Street’s increased bets on a possible rate cut in September, have helped to temper the bearish outlook for Bitcoin during its ongoing correction cycle.
According to the CME, as of July 8, futures rate traders had raised their expectations for a 25 basis point rate cut in September to about 67.3%, up from 46.6% a month ago. This shift toward dovishness was spurred by disappointing U.S. jobs data released on June 5, which sent short-term yields tumbling.
Lower yields reduce the opportunity cost of holding safe investments like U.S. Treasury bonds. Instead, demand for riskier assets like cryptocurrencies and stocks increases. Last week, on June 5, the S&P 500 and Nasdaq closed at record highs.
Bitcoin also followed the rally, reversing losses from the German government-sponsored Mt. Gox, rising 7% from its local low of $53,550 on June 5. That gain coincided with $398 million in weekly inflows into Bitcoin-based investment funds, including exchange-traded funds (ETFs).
“Digital asset investment products have seen a total inflow of $441 million, and the recent weakness in prices due to Mt Gox and German government selling pressure is likely to be seen as a buying opportunity,” said James Butterfill, researcher at asset management firm CoinShares.
Related: Mt. Gox Redemption Might Not Be as Bad for Bitcoin as You Think
Supportive macroeconomic catalysts, along with inflows into Bitcoin-backed funds, provide a positive technical backdrop. Notably, BTC is currently testing the support of a multi-month uptrend line and is expected to surge towards the multi-month horizontal trendline resistance level of around $71,500 in Q3 2024.
Conversely, if the price breaks below the uptrend line support, there is a risk of a plunge to the Fibonacci correction level of 0.786 around $51,500, which is closer to the Stockmoney Lizards analysis described above.
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.