Despite Bitcoin (BTC) experiencing significant price volatility and reaching five-month lows, several indicators suggest that the bulls may still have the upper hand. These indicators hint at a potential resurgence in BTC's price trajectory.
Key Catalysts for a Bull Market Cycle
Bullish Divergence on the Price Chart
Bitcoin has faced a turbulent start this month, dropping over 10.50% to hover around $57,000 as of July 7. At its lowest point, BTC touched $53,550. This decline was driven by fears of a market dump due to Mt. Gox's ongoing reimbursement of over 140,000 BTC to its clients and the German government's BTC liquidations.
However, the latest Bitcoin price decline was accompanied by a growing divergence between falling prices and the rising relative strength index (RSI). This divergence typically indicates weakening selling pressure, suggesting a potential rebound despite the ongoing price slump.
September Rate Cut Prospects
Another factor contributing to Bitcoin's potential resurgence is the rising probability of interest rate cuts in September. As of July 7, Wall Street traders saw a 72% chance of the Federal Reserve cutting interest rates by 25 basis points, up from 46.60% a month ago. This expectation is fueled by a slowdown in hiring in the United States, which often prompts the Fed to cut interest rates to stimulate economic activity.
Target rate probabilities for Sep. 18, 2024 Fed meeting. Source: CME
Lower interest rates are generally bullish for Bitcoin and other riskier assets because they make traditional safe investments like U.S. Treasury notes less attractive.
Increasing M2 Supply
The increasing M2 supply, which measures the total money supply, is another factor that could resume the Bitcoin bull market cycle. As more money circulates in the economy, it often leads to increased investment in various assets, including Bitcoin.
Market Conditions and Broader Impact
Tensions and Selling Pressure
The growing tensions amid the US Presidential elections, coupled with the increased selling pressure due to the $9-billion release from Mt. Gox, have contributed to the current market gloom. This has also affected other popular altcoins, including Ethereum (ETH), Dogecoin (DOGE), Ripple (XRP), Solana (SOL), and Litecoin (LTC), which have all seen declines due to Bitcoin's influence.
Market Fear & Greed Index
The overall Market Fear & Greed Index stood at 28 (Fear) out of 100 at the time of writing, reflecting the current sentiment in the market.
As of now, the global crypto market cap is $2.04 trillion, representing a 3.45% decrease over the last day.
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