3 reasons why the price of Bitcoin has not reached the bottom yet

۳ دلیل برای اینکه قیمت بیت کوین هنوز به کف نرسیده است

The price of Bitcoin has been on the rise in the last two days, but the value of this digital currency has decreased by 13.7% over the past week, which is its worst weekly performance since mid-June. Examining some such indicators shows that the Bitcoin correction period is over. However, considering these indicators alone can mislead many investors.

To Report Cointelegraph, index Hash Ribbons, one of these indicators is such. A metric that examines the Bitcoin hash rate to determine periods of accumulation or crowdsale of miners. Examining the recent changes of this index shows that the stage of collective sale of miners has ended on August 20 (29 August). This can lead to a change in the price trend and an upward movement of Bitcoin.

3 reasons why the price of Bitcoin has not reached the bottom yet
Bitcoin Hash Ribbons Index (click on the image to view the index in Eurovision).

However, one cannot ignore the large number of negative indicators that indicate the bearishness of the overall Bitcoin trend; From negative technical analysis to risks and problems caused by the macroeconomic situation. As a result, despite such optimistic criteria, the possibility of starting a downward trend cannot be ignored. In the rest of this article, citing 3 reasons, we will say why Bitcoin has not yet reached its price floor.

Bitcoin price in a bullish corner pattern

The decrease in the price of Bitcoin in the last week has created a rising wedge pattern on the one-day chart. With this pattern forming, we are likely to see it fall further in the coming weeks. A bullish angle is a bearish reversal pattern that forms at the end of an uptrend with a steeper support line than resistance. In this pattern, the price breaking downwards can lead to a price decrease to the maximum height between the ceiling and floor of the corner formed.

3 reasons why the price of Bitcoin has not reached the bottom yet
Forming a bullish corner pattern on the BTC/USD daily chart.

The technical chart above shows that if this pattern is to be completed by reaching its price target, Bitcoin could fall to $17,600. In other words, the price of Bitcoin will probably decrease by 25% from the current levels by September.

Read more: Getting to know 10 technical analysis chart patterns that every trader should know

Buyers’ incorrect analysis of Fed decisions

After reaching its price floor of $17,500 in June, Bitcoin has increased in price by nearly 45% during the formation of the bullish corner pattern on the chart. Interestingly, the start of Bitcoin’s upward trend has been accompanied by the growing expectation of investors from the peak of the inflation rate and the first reduction of the bank interest rate in March 2023 (Esfand 1401) by the Federal Reserve.

These expectations were created after the release of the statement of the “Free Market Committee” of the Central Bank of America by Jerome Powell, the head of the Federal Reserve, on July 27 (August 5).

Powell said in this statement:

The tightening of accommodative monetary policy continues, and we are likely to reduce the pace of rate hikes going forward as we assess the impact of our overall policy adjustments on the economy and inflation.

A look at the latest dot chart of the Federal Reserve’s “target funds rate” — the interest rate on unsecured loans from depository institutions and banks to other institutions — shows that most officials expect the rate to reach 3.75 percent by the end of 2023 and 3.75 percent in 2024. to decrease by 4%. Therefore, the prospect of interest rate cuts in the future remains speculative.

Dot chart of the Federal Reserve's target funds rate
Dot chart of the Federal Reserve’s target funds rate.

James Bullard, head of the Federal Reserve’s office in St. Louis, has said he will support a third consecutive 0.75 percentage point increase in interest rates at the central bank’s September policy meeting. According to its commitment, the Federal Reserve is supposed to reduce the inflation rate from the current level of 8.5% to 2%.

In other words, with the beginning of the contraction cycle of the Federal Reserve in March (March 1400), Bitcoin and other risky market assets were also in a downward trend and should remain under this pressure for the next few years.

Historical cycles repeat themselves

If we look at Bitcoin’s previous swings in bear markets, the relative increase and recovery of its price in recent weeks could be mistaken for a bullish signal.

3 reasons why the price of Bitcoin has not reached the bottom yet
Bitcoin price weekly chart.

During the bear cycle of 2018, the price of bitcoin nearly doubled from around $6,000 to over $11,500, but then fell back to $3,200, wiping out investors’ gains. . These growth cycles and price corrections have also occurred in 2019 and 2022.

Read more: market cycle; Everything you need to know about market phases


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