Bitcoin (BTC) finds itself in a precarious position as it enters a crucial week in the midst of a potential “double top” formation. After a disappointing weekly close below $26,000, BTC/USD is struggling to gain momentum due to low volatility. Analysts are predicting further downside and liquidity conditions support their argument. However, there may be some potential positives on the horizon.
One on-chain metric suggests that Bitcoin is currently experiencing a major shakeout similar to the one witnessed in March 2020. This shakeout could potentially lead to a rebound to “fair value.” Additionally, Bitcoin’s relative strength index (RSI) has retraced its year-to-date gains, reaching its lowest levels since January. These factors could potentially contribute to a recovery in Bitcoin’s price.
The weekly close below key trendlines confirms the formation of a double top structure on the BTC weekly chart. This structure consists of two local tops in 2023, both above $31,000, with a retracement to $26,000 in between. The weakness in BTC price now raises concerns of further downside movement.
Despite the negative price action, there is room for optimism. The 200-week exponential moving average (EMA) near $25,600 serves as potential support and could prevent a further decline. The past three weekly closes have been within $400 of each other, indicating a relatively stable price range.
The debate over Bitcoin’s ability to fill gaps in CME futures markets resurfaces as Bitcoin heads lower. These gaps often act as magnets for BTC price action in the future. Currently, the largest gap of interest is at $20,000. However, there is uncertainty over whether this gap will be filled or not, as historical gaps have not always been filled. The market structure will ultimately determine whether these gaps will be revisited.
Liquidity has become a concern for BTC/USD markets. A large block of bid liquidity is concentrated around $24,000, signaling a potential dip below this level. Another key level for bulls to retain is $24,750. If this level is breached, it could lead to further downside movement.
The macroeconomic landscape is also set to impact BTC price this week. The release of the United States Consumer Price Index (CPI) August print will provide insight into inflation rates and influence market expectations of the Federal Reserve’s interest rate decision. The Fed’s next meeting is scheduled for September 20, and current probabilities suggest rates will remain unchanged.
A concerning on-chain metric indicates that Bitcoin may be experiencing a “black swan” event similar to what occurred in March 2020. The number of unspent transaction outputs (UTXOs) in loss is at its highest level since the onset of the pandemic. This suggests that the current situation may be a significant event rather than just a temporary dip.
In conclusion, Bitcoin is facing a challenging week as it grapples with the possibility of a double top formation and low market volatility. However, there are potential silver linings, including the chance for a rebound to fair value and support from the 200-week EMA. The CPI release and the upcoming Fed meeting will also play a role in shaping BTC price in the coming weeks.