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Multiple indications and on-chain measures indicate a rising market, but technical analysis raises the potential that Bitcoin may collapse to new annual lows.
On July 26, the price of Bitcoin (BTC) fell below $21,000, reversing most of the previous week's gains and returning to the $23,300 to $18,500 range described by Glassnode experts as "the Week 30 high and Week 30 low."
A minority of experts and traders see the July 26-27 Federal Open Market Committee (FOMC) meeting and the anticipated Federal Reserve rate rise as the fundamental causes of the current market decline.
A few traders predict that the anticipated 75 to 100 basis point (BPS) rise will be followed by a relief rally that may see BTC, Ether (ETH), and other large-cap cryptocurrencies return to the upper end current trading range. This feeling is, of course, more speculative than based on solid analysis, so take it with a grain of salt.
Given that the BTC price has been trading in the same range for the previous 42 days, the real issue is whether the market will deliver more consolidation or another bout of capitulation.
In the on-chain newsletter published by Glassnode on July 26, experts assert that investors may discover “confidence via convergence” of several technical and on-chain measures, which indicate that the pinnacle of capitulation has long since passed.
Rapid deleveraging, according to experts, sent numerous measures into “severe statistical deviations.” With the worst selling likely behind us, a Bitcoin price rebound to the high $20,000 range was anticipated.
Glassnode observes: “June’s decline in price action generated the lowest 4-year rolling Z-score on record.”
The experts further highlighted that the 4-year rolling MVRV Z-score “indicates undervaluation for all bear cycle troughs, including 2015, 2018, and the March 2020 flash crash.”
When compared against several cohorts of long- and short-term sellers and measures such as Realized Price, Mayer Multiple, and longer-term daily and weekly moving averages, Glassnode argues that indications and historical data hint at increasing bullish momentum.
Bitcoin’s rise to $24,200 represented a temporary breakthrough from the current range, but the failure to sustain momentum at this level necessitated a retest of support at the range midline and 20-day moving average at $21,500.
According to independent market expert Michal van de Poppe, BTC maintained a price range of $21,600. Below this, the asset’s price movement depends on this week’s FOMC statements.
CryptoISO stated similar sentiments on the correlation between stocks and Bitcoin and the significance of the $21,500 price zone for BTC.
Fractal enthusiasts will notice that the price action within the current range is eerily similar to the May 8 through July 12 range-bound trading and subsequent breakdown that occurred on July 12; however, analysts would quickly point out that back-to-back catastrophes such as Voyager, Celsius, and 3AC exploding played a significant role in that sell-off, whereas there are currently no discernible black swan events on the horizon.
Both depict periods of 34 to 42 days of sideways trading. On several occasions, Peter Brandt, a seasoned trader, has characterized the current market structure as a “bearish rectangle” technical analysis pattern.
If the pattern breaks to the downside from its present range, the price will fall into the $14,500 to $13,000 level that some traders have been eyeing.
Last week’s range breakout to $24,200 on July 20 pierced the upper band of the Bollinger Bands momentum indicator. Now that price is below the midline, there is a greater chance that BTC will trade down to the lower bar, conveniently located at the bottom of the current range of $24,200 to $18,600.
Until a breakthrough or breakdown trigger occurs, range-bound trading is not causing concern. The earnings of major technology firms may determine Bitcoin’s path on July 27, the status of the market at the opening bell, and remarks from the Federal Open Market Committee.