Bitcoin Bulls Fail Again, But There’s Still Hope

• BTC bulls failed to penetrate critical resistance following positive US inflation data, leaving the doors open for more losses.

• The downside may be limited as the recent oversupply from the German state of Saxony has been exhausted.

• Bets on Fed rate cuts and FTX payments could offer support, according to a prime broker.

Thursday was a significant day for cryptocurrency markets as bitcoin {{BTC}} failed to overcome a key resistance despite a positive US inflation report, maintaining the downward trajectory seen since early June.

On Thursday, after the US reported the first drop in consumer prices in four years, markets quickly increased bets on a Fed rate cut, sending riskier assets including BTC soaring.

For a moment, it looked like bitcoin bulls would establish a foothold above the descending trendline, marking a selloff from June highs near $72,000. Such a move would have signaled the end of the pullback and could have attracted momentum traders, as discussed on Thursday’s First Mover America.

Read more: Fed may focus on weakening job market rather than inflation as it considers rate cuts: economists

However, bullish hopes were quickly dashed as prices fell below trendline resistance below $57,000 earlier today.

BTC hourly and daily charts. (TradingView/CoinDesk)

The latest bullish failure, seen against the backdrop of positive macro news flow, could mean more price weakness ahead. A similar trendline rejection on July 1 proved costly, deepening the sell-off.

Still, there is hope for the bulls. The daily chart’s MACD histogram, an indicator used to gauge trend strength and changes, is teasing a crossover above zero, a sign of an imminent bullish shift in momentum.

O oversupply from the state of Saxony in Germanythat catalyzed the price drop earlier this month is nearly dry. Furthermore, it remains unclear what percentage of the 95,000 BTC, which represents a portion of the total 140,000 BTC scheduled to be distributed to Mt. Gox creditors, will be liquidated.

“The prospect of part of FTX’s $16.3 billion payout in the coming months translating into buying pressure, the increasingly positive stance towards crypto on both sides of the aisle, and the potential for a September interest rate cut benefiting risk assets more generally should encourage medium- to long-term bulls,” crypto brokerage FalconX said in a newsletter on Friday.

FalconX added that the potential sale by Mt. Gox creditors could have a different profile than the Saxony sale. “For example, perhaps more flow will go to exchanges rather than professional liquidity providers, or perhaps a more diversified holder base will outperform the sale over time,” FalconX noted.

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