Market Overview: Bitcoin
The start of 2024 marked a pivotal moment for Bitcoin, as the long-awaited approval of the Bitcoin ETF opened the doors for a significant influx of institutional investment. This new source of demand coincided with the Bitcoin halving event in Q2, traditionally viewed as a bullish catalyst. However, as we highlighted in prior reports, the ETF approval’s impact was expected to overshadow the halving, given its potential to introduce substantial new capital into the market.
The weekly and monthly charts reveal a growing bearish influence, with the price repeatedly rejected from the $70,000 resistance level and forming a “Low 2” sell setup on the monthly timeframe. Despite the underlying long-term bullish structure, the current market dynamics suggest a potential continuation of the downtrend, at least in the short to medium term.
As we delve into this week’s analysis, we will examine the key levels and patterns that are shaping Bitcoin’s price action, assess the potential scenarios for both bulls and bears, and explore the factors that could determine the cryptoasset’s future trajectory.
Bitcoin
The 3-month chart of Bitcoin
The second quarter of 2024 will conclude with a bear bar closing below its midpoint, marking a reversal from the surprisingly strong performance in Q1. As anticipated in the Q1’s report, traders faded the initial bullish breakout, capitalizing on a downward move exceeding $10,000.
The fading of Q1’s bull breakout aligns with a recurring pattern observed in Bitcoin’s recent price action. This behavior reflects a trading range dynamic, where sharp moves in either direction are often met with profit-taking and a subsequent reversal. Traders anticipate these reactions, capitalizing on the volatility by fading breakouts and targeting relatively modest price moves within the established range. The Q1 breakout, while initially promising, ultimately succumbed to this pattern, as traders opted to secure profits and initiate short positions, leading to the subsequent correction.
The formation of a double top near the prior highs raises concerns, but the surprising strength demonstrated by bulls in Q1, fueled by the Bitcoin ETF approval, cannot be discounted. This fundamental factor introduces a new wave of institutional demand that could potentially outweigh current bearish concerns.
Traders are now faced with buying the dip at the high or selling a reversal. We anticipate good buying opportunities around the $50,000 or $40,000 levels, while others remain optimistic about a reversal from the $60,000 mark. The scenario for the bears has a good risk-reward; however, the market is always in long and the institutional buying during Q1 gives them a low probability of success, deterioration their trading equation.
The Monthly chart of Bitcoin
June’s bearish candlestick, closing near its low, has formed a “Low 2” sell setup, a pattern typically indicative of a potential trend reversal. This setup gains legitimacy as it follows a bull climax and a double rejection from the prior all-time high, a major resistance level.
For bears, the ideal scenario involves a continued downward movement towards the 20-month Exponential Moving Average (EMA). However, the $60,000, $50,000, and $40,000 levels are expected to attract significant buying interest, possibly leading to reversals in the form of wicks or trading range bars. Such price action could bolster bullish confidence, as it would signal a limited downside and potential for profit-taking by bears. Bulls will be looking, at a minimum, to test the current highs.
While a continuation of the upward trend remains possible, the current market structure presents challenges to buying due to wide the distance to the 20-EMA. The market may require a period of consolidation or a deeper retracement before a sustainable upward move can be established.
In conclusion, June’s price action has shifted the market sentiment, favoring the bears in the short term. However, the potential for strong buying interest at lower levels suggests that a complete reversal of the bullish trend is not likely. Both bulls and bears are now focused on key support and resistance levels, with bears aiming for a $10,000 to $20,000 move downwards, while bulls seek to capitalize on dips for a more favorable risk-reward ratio.
The Weekly chart of Bitcoin
The Bitcoin weekly chart continues to depict a market undergoing consolidation following a sustained bullish rally. This week’s bearish candlestick, the third consecutive one, reached the 20-week EMA and $60,000 level, as would have been expected. While the medium and long-term structure remains bullish, this sequence of bearish candles indicates a growing bearish influence.
The market’s inability to break through the $70,000 resistance for the third time led to the price testing the $60,000 support level and the 20-week EMA, and now it might trade even further, towards the $50,000 level, where bears aim to test a prior Breakout Point.
The overall context remains consistent with the previous report. Bearish movements are expected to eventually lose momentum, presenting opportunities for long-term buyers who can cost average. Weekly bulls should remain unfazed even if the price tests the $40,000 support. Meanwhile, the $60,000 and $50,000 levels remain critical junctures to monitor for potential trend reversals.
The formation of a bull bar, at the 20-week EMA, would typically be viewed as a favorable buying opportunity for bulls. However, the preceding three consecutive bear bars, two of which exhibited strong downward momentum, significantly diminish the likelihood of a successful bullish reversal, and sideways to down is more likely if there is a reversal up from here.
We encourage you to share your thoughts and opinions on this analysis in the comments section below. Do you agree with our assessment? What are your expectations for Bitcoin’s price action in the coming weeks? Let’s discuss and learn from each other’s perspectives. Please share this analysis with your fellow traders to spread the knowledge and foster a more profound understanding of Bitcoin’s price movements.
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