3 Bitcoin Trading Behaviors Suggest BTC’s Decline to $24K is a ‘Fakeout’
The Bitcoin (BTC) price surged toward $24,200 on July 28 after a nearly 10.5% gain that began a day earlier.
The gains emerged after Federal Reserve Chairman Jerome Powell signaled intentions to slow their prevailing tightening. They prompted some Bitcoin analysts to predict near-term upside continuation, with CryptoHamster seeing BTC at $26,000 next.
It appears that the negative breakout was false and the bullish flag has been validated. Let’s see how fast $BTC can achieve these goals. #bitcoin $BTCUSD $ETH $ETHUSD #bit coin #bitcoin # bitcoin pic.twitter.com/nKoEV8440X
— CryptoHamster (@CryptoHamsterIO) 28 July 2022
But BTC’s potential to fully recover from its ongoing bearish slumber seems low for at least three main reasons.
Bitcoin bulls have been fooled before
Bitcoin established its all-time high of $69,000 in November 2022. Since then, the cryptocurrency has fallen by more than 60% while undergoing several mini-pumps on the way down.
On the daily chart, Bitcoin has retraced at least five times since November 2021, securing 23% to 40% gains on each recovery. Nevertheless, it has continued its correction each time after forming a local price peak around its exponential moving averages (EMA) and then falling to new annual lows.
This time looks no different, with Bitcoin facing a bullish rejection in June and recovering nearly 17% a month later. Notably, the BTC price is facing temporary resistance at its 50-day EMA (the red wave) around $23,150, with a breakout clearing towards $27,000, coinciding with the 100-day EMA (black).
At $27,000, the price would still form a lower high compared to the previous local highs. So technically it raises the possibility of another bearish continuation move.
High sales, low buying volume
Interestingly, the volume behavior during the ongoing Bitcoin correction shows a greater interest in selling the coin at local peaks.
The daily chart below illustrates that by highlighting the volume readings during downtrends and uptrends since November 2021. For example, the last two major price declines in May and June coincided with a sharp increase in sales volume.
In comparison, the follow-up returns to these price declines accompanied by modest to lower trading volumes. The ongoing volume behavior looks similar, peaking during the downtrend and falling as the price recovers.
This suggests a weakening of the upside momentum, which could lead to another price correction.
BTC to stock correlation turns back to positive
Bitcoin is again following stock market trends despite a brief disconnect from them in early July.
For example, on July 28, the daily correlation coefficient between Bitcoin and the tech-heavy Nasdaq Composite was close to 0.66. That includes declines in both markets after US GDP plunged for the second quarter in a row.
It officially confirms that the US has entered a “technical recession”, which could weigh negatively on the stock market. Therefore, Bitcoin’s downside prospects appear to be high if the positive correlation with the stock market continues.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
