Bitcoin Experiences Typical Summer Decline
Bitcoin’s recent drop in price below its bull market support band (BMSB) has raised concerns about its potential for a Q4 rally, a pattern that has been observed in previous years. Analyst Benjamin Cowen recently highlighted this trend in a post on X.
Cowen emphasized the importance of Bitcoin regaining its position relative to its BMSB in the coming weeks, following the recent price crash. He compared this situation to past cycles, specifically the summers of 2013 and 2023, where Bitcoin’s recovery led to significant price rallies.
In 2013, Bitcoin reached its lowest point in early July before surging above the 21-week EMA and rallying in Q4. Similarly, in 2023, Bitcoin experienced a similar pattern, dropping below its BMSB in August before staging a strong comeback in the final quarter.
Jacob Canfield also pointed out bullish signals from Bitcoin’s Relative Strength Index (RSI), highlighting oversold bullish divergences on the daily chart as high-probability trade setups. He predicts that if Bitcoin reclaims the daily trend, it could potentially revisit its former range high of over $70,000.
Furthermore, another independent analyst highlighted that the Bitcoin volatility index suggests that high volatility phases often precede the second phase of a bull market. When the volatility index enters high volatility territory, it typically signals the start of significant bullish momentum.
The rising probability of an interest rate cut further influences Bitcoin’s potential to resume its bull run in the coming weeks. Wall Street traders currently see a 93.3% possibility of the Federal Reserve cutting interest rates by 25 basis points in September, compared to less than 50% a month ago. This expectation has risen due to a slowdown in hiring in the United States.
When the job market weakens, the Federal Reserve often considers cutting interest rates to stimulate economic activity. Lower interest rates are generally positive for Bitcoin and other riskier assets because they make traditional safe investments like US Treasury Notes less appealing.
The potential shift in monetary policy could provide additional support for Bitcoin’s recovery.
However, Bitcoin has been struggling to stay above the $56,550 support level. On July 5, it briefly dropped below this level but quickly rebounded as bulls purchased the dip. Bears may attempt to sink the price below this level again, potentially leading to a slide to $53,480 and even further to solid support at $50,000.
Despite the downsloping 20-day exponential moving average (EMA) indicating an advantage for the bears, the positive divergence on the relative strength index (RSI) suggests that bearish momentum might be slowing. Buyers will need to push the price above the 20-day EMA to maintain the range-bound action between $56,550 and $73,780.
On-chain indicators also provide some insights. The slight profit-taking indicated by the aSOPR suggests a potential market top, while the Binary CDD value suggests that long-term holders are retaining their coins, possibly in anticipation of future gains.