Bitcoin Bulls Falter Once More, But Hope Remains

Despite a positive U.S. inflation report, Bitcoin was unable to overcome a key resistance level on Thursday, reflecting ongoing challenges in the market.

BTC bulls failed to penetrate critical resistance despite positive U.S. inflation data, leaving the doors open for further potential losses. However, the downside may be limited as the recent supply overhang from Germany's Saxony state appears to have been exhausted. Additionally, bets on a Fed rate cut and potential FTX repayments may offer some support, according to a prime broker.

Thursday was a pivotal day for the crypto markets as Bitcoin (BTC) struggled to break through a crucial resistance level despite encouraging U.S. inflation data, continuing the downward trend that began in early June. With the U.S. reporting its first drop in consumer prices in four years, market optimism surged, increasing bets on a Fed rate cut and lifting higher-risk assets like BTC.

Initially, there was optimism among Bitcoin bulls that they could establish a strong position above the descending trendline, which has been a defining factor since the sell-off from the June highs near $72,000.. Achieving this would have indicated a potential reversal of the pullback and attracted momentum traders, as highlighted in Thursday's First Mover America. However, BTC bulls failed to overcome this key resistance, keeping the possibility of further declines open. Despite this setback, the downside risk might be mitigated by the exhaustion of the recent supply overhang from Germany's Saxony state. Additionally, the prospect of FTX repayments and heightened expectations for a Fed rate cut could provide some support.

However, bullish hopes were quickly dashed as prices turned lower, failing to breach the trendline resistance, and dropping below $57,000 early today.

The latest setback for bulls, amidst a backdrop of positive macroeconomic developments, suggests potential further price weakness ahead. Similarly, when the trendline was rejected on July 1, it worsened the market downturn.

However, there are optimistic signs for bullish traders. The daily chart's MACD histogram, a key indicator for assessing trend strength and shifts, hints at a potential bullish momentum crossover above zero.

Moreover, the supply pressure from Germany's Saxony state, which triggered earlier price declines this month, is nearing depletion. Uncertainty lingers over the liquidation percentage of the 95,000 BTC earmarked for distribution among Mt. Gox's creditors out of the total 140,000 BTC.

Crypto prime broker FalconX highlighted in a newsletter on Friday that the potential influx of buying pressure from the anticipated $16.3 billion FTX repayment in the months ahead, coupled with increasing positive sentiment towards cryptocurrencies in different sectors, and the potential effect of an interest rate cut in September on risky assets, are expected to bolster medium- and long-term bullish sentiment.