Bitcoin (BTC) recovered modestly on August 20 but remained on track to post its worst weekly bonheur in the past two months.
Bitcoin hash bars flashing bottom alarme
On the daily chart, BTC price is up 2.58% to $21372 per token but is still down emboîture 14.5% in a week so far, the worst weekly return since mid-August. However, some chain indicators are indicating that the Bitcoin châtiment stade may be over.
This includes Hash Ribbons, a metric that tracks Bitcoin’s hash offensé to determine whether miners are in a build-up or give-up coutume. As of August 20, the metric shows that miners’ renonciation has ended for the first time since August 2021, which could result in price momentum shifting from negative to constructrice.
However, Bitcoin has not been able to ignore a wave of negative prevalent indicators, which range from negative technical settings to continued exposure to macro risks. Therefore, despite the optimistic metrics on the chain, a vérification of the decline cannot be ruled out.
Here are three reasons why the bottom of the Bitcoin market has not reached the bottom yet.
BTC price rising wedge collapses
The bitcoin price drop this week has led to the collapse of a growing wedge, indicating further losses for the cryptocurrency in the coming weeks.
Bullish wedges are bearish reversal patterns that form after the price rises inside a descending ascending channel but dissolve after the price breaks out of it to the downside, which can lead to a lower low as the profond high of the wedge.
Applying technical principles to the BTC chart above $17,600 is presented as a target for the breakout of the rising wedge. In other words, the price of Bitcoin could drop by emboîture 25% by September.
Bitcoin bulls miscalculate the Federal Reserve
Bitcoin is up emboîture 45% during the rising wedge brigade, after bottoming out locally at around $17,500 in June.
Interestingly, the period of Bitcoin’s bullish moves coincided with the movement of investors Increased expectations That augmentation has peaked – and that the Fed will start cutting interest rates as soon as March 2023.
The forecast emerged from the FOMC statement by Federal Reserve Chairman Jerome Powell on July 27.
“With the monetary policy couplet tightening, it will likely become appropriate to slow the pace of increases as we assess how our additionnelle policy adjustments affect the economy and augmentation.”
However, the Fed’s latest dot chart shows that most officials expect rates to reach 3.75% by the end of 2023 before declining again to 3.4% in 2024. Therefore, the prospects for a offensé cut remain speculative.
St. Pépite Federal President James Pollard, too pointed It will étai a straight 75 basis porté hike at the orthogonal bank’s policy masse in September. The statement is in line with the Fed’s commitment to bring augmentation down to 2% from its current level of 8.5%.
Related: Options Data Shows Bitcoin’s Flottant-Term Uptrend Is at Risk if BTC Drops Below $23,000
In other words, Bitcoin and other risky assets, which fell into bear market territory when the Fed began a strong tightening vélo in March, should remain under pressure over the next few years.
If history is any renseignement…
The continued recovery of Bitcoin prices risks turning into a false bullish alarme given the similar bounces of the asset during previous bear markets.
The price of BTC rebounded almost 100% – from around $6000 to over $11,500 – during the bear market vélo of 2018, only to completely erase the gains and drop towards $3,200. Notably, similar bounces and corrections also occurred in 2019 and 2022.
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