Is Bitcoin Ready to Bounce Back?

Bitcoin (BTC-USD) has been on a scary ride lately, plummeting to a five-month low of $53,550. However, if you look closely, there are compelling signs suggesting that Bitcoin might be ready to bounce back. Let’s dive into what’s happening and why some experts believe the cryptocurrency’s fortunes could soon improve.

Bullish Divergence and RSI Signals

Bitcoin’s price drop in early July was unsettling, but there’s a silver lining. The cryptocurrency experienced a growing divergence between its falling prices and a rising Relative Strength Index (RSI). This divergence typically signals that selling pressure is weakening, hinting that Bitcoin could be on the brink of a rebound.

Bitcoin’s RSI is currently at 36.12, signaling a mildly oversold condition for the cryptocurrency. According to Cointelegraph, this kind of scenario often precedes a reversal or a slowdown in a downtrend, suggesting the market sentiment might soon shift back to bullishness.

Traders typically interpret RSI values below 30 as strong oversold signals, whereas readings between 30 and 40, like Bitcoin’s current level, signal a less extreme but still bearish momentum

Rate Cuts and Economic Influences

The prospects of Bitcoin resuming its bull run are also buoyed by economic factors. Wall Street traders are betting on a possible interest rate cut by the U.S. Federal Reserve in September. As of July 7, there was a 72% chance of a 25 basis points cut, up from 46.60% the previous month, according to data from CME. Lower interest rates typically make traditional investments less attractive, driving investors towards riskier assets like Bitcoin.

Moreover, inflation easing as noted by Federal Reserve Chair Jerome Powell could play a role. While Powell emphasized the need for more data before cutting rates, his acknowledgment of progress in reducing inflation buoyed hopes of an economic environment favorable to Bitcoin.

ETF Inflows Signal Renewed Interest

Another bullish sign is the resumption of inflows into U.S.-based spot Bitcoin exchange-traded funds (ETFs). After experiencing outflows, these funds attracted $143.10 million worth of BTC on July 5, following weak unemployment data from the U.S. Cointelegraph reports that the Fidelity Wise Origin Bitcoin Fund (FBTC) led these inflows with $117 million. This resurgence in ETF investments signals rising risk sentiment among Wall Street investors, indicating that many are still bullish on Bitcoin’s prospects.

Rising Money Supply and Miner Activity

Additional positive cues for Bitcoin come from the recent rise in the U.S. M2 money supply. As of May 2024, the M2 supply increased by approximately 0.82% year-over-year. More money in circulation typically leads to higher investments in assets like Bitcoin, as traditional investments become less appealing.

Moreover, Bitcoin miner capitulation metrics are nearing levels seen during the market bottom after the FTX crash in late 2022. A decline in Bitcoin’s hashrate by 7.7% suggests that weaker miners are exiting the market. Historically, such capitulation has often preceded market recoveries, as it reduces selling pressure and stabilizes operations for remaining miners.

What Is BTC’s Price?

At the time of writing, Bitcoin is sitting at $57,800, having quickly bounced back from its dip to the $53K-$54K range. This rebound suggests there’s still strong confidence in Bitcoin. Buyers didn’t let the price stay low for long, showing that the bulls might be gaining some ground. It seems like there’s cautious optimism in the air.

Key Takeaway

While Bitcoin’s recent price action has been nerve-wracking, several indicators suggest that the bottom might be in sight. With bullish divergence, supportive economic factors, renewed ETF inflows, and positive miner activity, Bitcoin could be poised for a comeback. Keep an eye on these developments as the cryptocurrency market continues to evolve.