Market Overview: Bitcoin
Bitcoin exhibited exhibited considerable volatility on July, yet it failed to deliver decisive results for either bulls or bears. The repeated rejection of the $70,000 resistance implies that sideways to downward movement is likely in the coming months. The interplay between the $70,000 resistance and $50,000 support will likely define the medium-term trajectory of Bitcoin’s price.
Bitcoin
The Monthly chart of Bitcoin
Bitcoin has been in an uptrend since early 2023, successfully reversing the steep 80% drawdown experienced between late 2021 and late 2022. This bullish momentum culminated in a new all-time high near $74,000. However, since reaching this peak, Bitcoin’s price has entered a tight trading range just below $70,000, now acting as a significant resistance level. This period of consolidation follows a notable bull run, indicating potential exhaustion and uncertainty among market participants.
In June 2024, the market formed a Low 2 sell signal bar, a bearish setup occurring after a buy climax near a major resistance level (the prior all-time high). The context was good for a bearish setup, suggesting a potential reversal or at least a deeper pullback. However, the bearish momentum lacked follow-through in July 2024. The monthly close was above the entry point of the Low 2 setup, failing to meet the expectations of bears looking for a more decisive downside move.
The price action showed promise for the bulls during last week´s report, forming a High 2 setup, a failed Low 2 setup. This created a temporary bullish sentiment, especially as the price approached the psychologically significant $70,000 mark. However, the bullish momentum faltered dramatically on monday, right before the monthly bar close, with prices reversing sharply from the $70,000 resistance and trading significantly lower, nearly $10,000 below this key level.
This reversal suggests that while there is interest from bulls to push higher, the $70,000 resistance is strong. A failed breakout attempt highlights the prevailing indecision and the potential for sideways to downward movement in the near term.
Looking ahead, several scenarios could unfold based on current technical insights. The 20-month EMA could act as a crucial support level if the price continues its downward trajectory. This moving average has historically provided strong support in bullish trends and may attract buying interest if tested.
Upside targets include a measuring gap that points to around $80,000. The $95,000 level is another potential target, derived from the width of the current tight trading range. Finally, the much-discussed $100,000 mark remains a long-term objective for bulls.
The Weekly chart of Bitcoin
Bitcoin’s weekly chart reveals a market in a prolonged trading range, spanning over 20 bars following a significant bullish breakout. This range-bound activity indicates a balance between buyers and sellers, with neither side establishing a dominant trend direction. The price has twice initiated clear swing downs from the $70,000 level, a major resistance point, and is now potentially forming a third swing down from this region.
This week, the market produced an outside down bar, suggesting increasing bearish pressure following a sequence of three bars, two of which were strong bullish bars. However, these bullish bars emerged in the middle of the trading range, making them less attractive for buying due to the lack of clear trend continuation.
The outside down bar could be the beginning of a move toward the $50,000 level, a significant support area that aligns with several key factors: a previous breakout point, a psychological round number, and the 20-month EMA. Historically, these elements have provided substantial support and could attract buying interest if tested.
For bulls, the strategy remains cautious. The reluctance to buy at higher levels suggests they may be waiting for a pullback to more attractive price levels, such as $50,000 or even $40,000. These levels offer a more favorable risk-reward ratio, especially given the proximity to established support zones.
For bears, engaging in selling during this potential downward move presents challenges. Selling into a recent price range can be perilous, as prices often behave reversing. Bears must exercise caution, avoiding overcommitting. Selling pullbacks will likely deliver better trader equation opportunities.
If the price reverses from the current levels and initiates a second leg up, it may indicate a shift in market dynamics, encouraging bulls to look for buy setups. Ideally, bulls would prefer a breakout mode pattern near the top of the range or a breakout above the current all-time high, accompanied by a breakaway gap or strong follow-through. Such a development could pave the way for a test of the $100,000 mark, aligning with longer-term bullish objectives.
However, should the price continue downward, testing the $50,000 or $40,000 support levels, it would present significant opportunities for buyers seeking value in the market. These levels provide strong confluence with historical price action, making them appealing for longer-term bullish positions.
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