A precarious week is ahead for Bitcoin as recent price action is dubbed a “dead cat bounce” — traders fear another downturn. This makes the sentiment rather heavily bearish compared to last week’s close, which was the lowest in four months. Traders are worried about a “double top” formation that indicates BTC could dip below the $50,000 mark.
The latest sell-off, prompted by actions of both the U.S. and German governments, coupled with Mt. Gox creditor reimbursements, has enhanced market fears.
With #Bitcoin closing its weekly below the May low, the strength on Friday makes we think more of a dead cat bounce and continuation lower over the next few weeks.
We have to see how this week pans out with CPI data etc… but until otherwise I’m still betting lower to come. https://t.co/ZIWa0ZS4po pic.twitter.com/fvmwAAauzN— AlphaBTC (@mark_cullen) July 8, 2024
Government Actions and Market Reaction
The German government has moved 1000 BTC to various destinations, such as Coinbase and Bitstamp, for approximately $55.79 million. According to the data available through tracking, this is an ongoing trend over 19 days in which a total of 11,032.3 BTC, the equivalent of $668.2 million, has been transferred. These transactions and repayments headlined Mt. Gox creditors, further fueling the market back to multi-month lows.
These large-scale transfers have caused convention of traders ‘ bearish sentiment, briefly sending the Bitcoin price below $55,000 before it further stabilized in the area between $55,000 and $56,000. Further sales by the German government are considered one of the drivers of prices down as supply is higher and appears to rattle some of its market participants.
Investor Sentiment and Market Indicators
The crypto-fear and Greed Index has plunged, hitting levels last seen early in 2023. This swing from “extreme greed” to “extreme fear” underscores the wild sea change in sentiment. The measure is 28/100, down some 50 points over the past month.
Although the medium and long-term bias is bearish, some market indicators suggest potential for a bullish reversal exist. RSI divergence in the lower time frames does give a possibility of a bounce back. The lower price rejection from the $54,000 level also revealed significant demand, which showed a possible absorption of the selling pressure.
Macro Factors and Future Outlook
It will be a crucial week for Bitcoin, with many macroeconomic data releases. The Consumer Price Index and the Producer Price Index for June will come in from the US, while testimony from Federal Reserve Chair Jerome Powell will set the tone in the market. Consequently, these events may drive the broader financial markets, including cryptocurrency markets.
The chances of the Federal Reserve moving its rate in July are dim, per the market expectations seen on the CME Group’s FedWatch Tool. However, unexpected data can still sway trends. For that reason, traders and investors will be looking toward these developments for any possible influences they can have on the prices of Bitcoin.
There is mild panic in the market due to the small-scale sales of Mt.Gox/Govt coins, but no one is talking about the unrealized losses of STH whales, which currently equal 218K BTC.
I have no idea what will happen to the market if they lose their nerve.
✊ HODL pic.twitter.com/JIB2iWEA0a
— Axel 💎🙌 Adler Jr (@AxelAdlerJr) July 8, 2024
Concurrently, it has been reported that the defunct Japanese crypto exchange Mt. Gox has reportedly started refunding its creditors, transferring more than 47,000 BTC—close to $2.7 billion—to their wallets. All this activity is somehow putting some supply pressure on the market. Some analyses speculated that most of those creditors would sell their Bitcoin due to the immense value appreciation since the exchange’s downfall.
