Following a prolonged downtrend since hitting an all-time high in March, Bitcoin’s recent slump has shown signs of approaching a bottom, according to market analysis firm Santiment. The company stated that traders exhibited weak “buy the dip” interest during Bitcoin’s latest decline to around $60,200. This signals the potential proximity of a bottom, as a lack of confidence among the public is usually a reliable sign that prices have reached rock bottom.
Furthermore, Bitcoin’s current phase of consolidation may last from one to six months. During this period, Bitcoin is expected to remain within a narrow trading range with low volatility. This phase, known as the “bore you to death” phase, will cause frustration among investors, with some predicting that the uptrend has come to an end and others selling to invest in stocks during the market’s bottom. However, according to Charles Edwards, founder of crypto hedge fund Capriole Investment, this discomfort will reach its peak just before the consolidation concludes.
The current situation bears similarities to the period from April to September 2023, when Bitcoin remained trapped in a price band between $25,000 and $30,000 for a protracted six months. Cryptocurrencies eventually managed to maintain a long-term rally, culminating in a new record high in March 2024.
Moreover, Bitcoin’s recent fallout can be attributed to the surge in the US dollar, coupled with lowered expectations regarding future interest rate cuts. According to Bitfinex analysts, the market’s uncertainty is likely to persist in the short term, with low volatility. They anticipate that the actual tapering of quantitative tightening by the Federal Reserve, scheduled to commence next month, will lead to an increase in dollar liquidity, which will benefit risky assets like cryptocurrencies that are sensitive to global liquidity conditions.
However, the recent reversal of the US dollar’s six-month high, triggered by last week’s Federal Reserve meeting and weak employment figures, could provide support for the upcoming Bitcoin rally. Bitfinex believes that sustained strength in Bitcoin and a return to previous lows, along with a weakening US dollar, is a clear indication of a favorable new trend that could result in a highly positive Q3-Q4 for Bitcoin.
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