Despite a turbulent July for Bitcoin (BTC), with prices sinking over 10.5% to hover around $57,000, several technical indicators suggest a potential upswing on the horizon. This article explores these bullish signals that could spark a Bitcoin price resurgence.
Bullish Divergence and Technical Chart Patterns Hint at Reversal
While the price decline is undeniable, a growing divergence between falling prices and the rising Relative Strength Index (RSI) is a noteworthy development. In simpler terms, this suggests that selling pressure might be weakening despite the price slump. This scenario, in technical analysis, often precedes a potential price reversal or a slowdown in the downtrend.
Furthermore, the formation of a bullish hammer candlestick pattern on July 5th strengthens the bullish case. This pattern, characterized by a small body and a long lower shadow, hints at potential buying pressure emerging. A similar pattern preceded a price recovery in May, offering historical context.
Oversold RSI and Rate Cut Expectations Add Fuel to the Bullish Fire
The daily RSI reading nearing the oversold territory of 30 is another bullish indicator. Analyst Jacob Canfield interprets this as a possible signal for a rebound, potentially pushing Bitcoin back to its “former range high” of over $70,000.
Adding to the bullish sentiment is the rising probability of a September interest rate cut by the Federal Reserve. As of July 7th, Wall Street traders see a 72% chance of a 25 basis point reduction, compared to 46.60% a month ago. This shift in expectations stems from a slowdown in U.S. hiring, which historically prompts the Fed to lower rates to stimulate economic activity. Lower interest rates generally benefit Bitcoin and other riskier assets by making traditional safe-haven options like U.S. treasuries less attractive.
Bitcoin ETF Investors Return, Signaling Renewed Risk Appetite
The resumption of inflows into U.S.-based Spot Bitcoin exchange-traded funds (ETFs) after a brief outflow period is another positive sign. This indicates a return of risk appetite among Wall Street investors, with the Fidelity Wise Origin Bitcoin Fund (FBTC) leading the charge with a $117 million inflow on July 5th.
Expanding U.S. Money Supply and Miner Capitulation: Bullish Long-Term Indicators
A recent increase in the U.S. M2 money supply, a measure of overall liquidity, also bodes well for Bitcoin in the long run. Increased money circulation historically leads to more investment in riskier assets like Bitcoin as traditional investments offer lower returns.
Finally, Bitcoin miner capitulation metrics, which track miners selling their holdings due to financial stress, are nearing levels seen during market bottoms. This suggests a potential price floor, as weaker miners exit and more competitive ones see profit margins improve.
Conclusion
While Bitcoin’s recent price decline has caused jitters, a closer look reveals underlying bullish signals. Technical indicators, renewed investor interest, and broader economic factors all suggest a potential price rebound in the near future. However, the cryptocurrency market remains volatile, and investors should always conduct their own research before making investment decisions.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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