If someone asks what it feels like to be invested in crypto, show them the cover image. It's a perfect depiction of what being invested in cryptocurrency feels like.
Not too long ago the entire crypto market was in a state of despair with fear being extremely high and Bitcoin looking like it may fall below $50k. Bitcoin has recovered over 20% and has now touched $65k. It seems as though those who were brave enough to purchase BTC when the market was extremely fearful have been rewarded.
Does this mean we’ve seen the pullback lows for this correction and the bull market is back on. Most likely, yes, but let’s dive deeper to get an understanding of what may be in store after this recent Bitcoin price action.
Fundamental Overview:
Whilst BTC rallied more than 10% over the weekend, the headlines capturing every media outlet was the attempted assassination of former US President Donald Trump. Trump is the self-proclaimed ‘Crypto President’ and has announced his support for Bitcoin. Many speculated that if Trump were to win the election, the ‘Trump Pump’ would occur and see Bitcoin and other markets rally. However, the recent events over the weekend may have kicked off the ‘Trump Pump’ early. BTC rallied 10%, and Trump related meme coins such as TRUMP rallied 70%.
A major catalyst for Bitcoin’s pullback to the low of $53.5k was the German Government selling their seized Bitcoin. This snowballed along with the US DOJ selling their seized assets and Mt Gox’ repayments. It has been reported that the German Government has fully exhausted their seized Bitcoin, thus relieving BTC of major selling pressure. With this lifted, allowed BTC to regain $60k and almost reach $65k less than a few days after this information was reported. The image below shows the balance of the German Governments' Bitcoin wallet. Almost $4B worth of Bitcoin was sold off over the since June with nearly $3B of the selling occuring within the last week.
A clearer view of the above image can be found here: https://static.news.bitcoin.com/wp-content/uploads/2024/07/german-government-donated-btc-1536x540.jpg
Inflation is showing signs of easing with the latest CPI data set coming in under forecast for the third month in a row. This has resulted in some calling for two interest cuts towards the backend of the year. As expected, decreasing CPI figures leads to bullishness in risk on assets. BTC has reaped the rewards of these figures. The next key event to watch out for is the upcoming FOMC meeting where the next interest rate decision will be made. The graph below shows the likelihood of the decision, it is more than likely that we don’t see a change in interest rates at this meeting. However, the meeting in September shows a high probability for the first interest rate cut.
Future interest rate probabilities can be found here: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
All of these events over the past week have been bullish for Bitcoin which has been reflected in price action and may have set the tone for the remainder of the year.
Technical Overview:
From a technical standpoint we delve into a recent Bitcoin chart to gain an understanding of what is to come.
A clearer view of the above chart can found here: https://www.tradingview.com/x/W3AE9D6g/
The chart above may seem daunting at first, however, it is quite simple. The current breakout and the creation of a new higher high indicates that the trend has begun to flip bullish and momentum is with the bulls. To solidify the trend switch and bullish case back on, the next pullback that occurs must create a higher low (stay above the recent low of $53.5k).
The two fair value gaps displayed on the chart above provide us with a probable area of where to expect the pullback to reach. The lower fair value gap sits at approximately $58k with the closer one around $61k (5-8% retracement). If BTC were to retrace to this level and then continue upwards from there, the upward trend would be confirmed with a higher low being set.
Things are looking bleak for the bears right now, they failed to push BTC below $50k and have seen over $400 million USD worth of shorts get liquidated over the last four days. To fuel the bearish hopium, one would hope that this major move is one massive bull trap due to the potential hidden bearish divergence that could be setting in. Hidden divergence often leads to a continuation of the overall trend. Divergence will be confirmed if BTC fails to get above $66.5k on this move up before a pullback. The divergence should drive BTC down to the pullback regions mentioned above, if the divergence is strong enough and bears continue to push BTC below these levels, then a bull trap may be confirmed. But until then, the momentum remains with the bulls and the likelihood is that we continue higher after a small pullback.
Whilst things look bullish and we have seen the majority of coins move 20%+ over the last week, with some meme coins such as WIF returning 40% since the lows. However, it is way too premature to call for an alt season or even a full fledged bull run, BTC remains 15% from its all time high. Whilst majority of altcoins are yet to set a new ATH, ETH remains 30% away from its ATH set back in 2021, whilst WIF (which returned 40% in a matter of days) is still 55% away from its April ATH.
Whilst 30% or 55% away from ATH may not seem too distant, coins require a much greater increase to recoup a loss. The graph above provides the visual description on what is required to make up for a 30% or 50% drawdown. Majority of altcoins are down 50-70% from their ATHs, alt season will need to arrive for them to have any chance at creating new ATHs. The general rule of thumb is that once Ethereum has made a new ATH, then alt season is set to begin.
Things are looking good for Bitcoin and the crypto market, but we are not out of the woods just yet. Fundamentally, Bitcoin looks strong and to be bullish, whilst some technical analysis may suggest a slight glimmer of hope for the bears. Overall, Bitcoin remains an asset we are long term bullish on, pullbacks may be scary and emotional, but they present the investors with golden buying opportunities. If a potential pullback is to come, then be sure to take advantage of it by purchasing Bitcoin.
Written by Alexandar Artis
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