On July 26, the price of Bitcoin (BTC) fell below $21,000, giving back most of the gains accumulated in the previous week and returning to the range of $23,300 to $18,500 that Glassnode analysts describe as “the maximum and the minimum of week 30″.
Some analysts and traders attribute the July 26-27 Federal Open Market Committee (FOMC) meeting and the expected Federal Reserve interest rate hike as the main reasons for the current sell-off.
Barring the announcement that the US economy has entered a recession, some traders believe that the expected 75 to 100 basis point (bps) rally will be followed by a relief rally that could send BTC, Ether and other altcoins from large caps back to the top of their current range. Of course, this sentiment reflects more speculation than solid analysis, so take it with a grain of salt.
With the price of BTC simply continuing to trade in the same range it has been in for the past 42 days, the real question is whether the market will bring more consolidation or another round of capitulation.
In their July 26 on-chain activity bulletin, Glassnode analysts state that investors can find their “conviction through the confluence” of multiple on-chain and technical metrics that suggest the peak of capitulation has passed weather.
According to analysts, the rapid deleveraging pushed many metrics into “extreme statistical deviations” and with the worst of the sell-off possibly past, Bitcoin price was expected to return to the $20,000 zone.
Glassnode noted that:
“June’s leg down in price action has produced the lowest 4-year rolling Z-Score on record.”
And the analysts explained that the 4-year rolling MVRV Z-Score “signaled an undervaluation for all bear cycle bottoms, including 2015, 2018 and the March 2020 flash crash.”
When compared to various long-term and short-term seller cohorts, and to metrics such as realized price, Mayer’s multiple, and long-term daily and weekly moving averages, Glassnode suggests that confluence in indicators when compared to Historical data points to growing bullish momentum and signs of a bottom.
On-chain data suggests a bottom, but what does technical analysis say?
From a technical analysis perspective, Bitcoin’s move to $24,200 presented a brief breakout of the current range, but the inability to sustain momentum at this level presented the necessary alternative of a retest of lower support at the midline of the range near the 20-day moving average ($21,500).
According to independent market analyst Michaël van de Poppe, $21,600 is the zone for BTC to hold, and below it, the asset’s price action hinges on this week’s FOMC comments.
The markets are correcting and preferred was $21.6K to hold for #bitcoin.
That’s a crucial breaker now too if it breaks to the upside -> new highs.
Looking at a $20.5K-20.7K area to hold for #bitcoin going into FOMC tomorrow.
If upwards after. pic.twitter.com/tueXPNprza
— Michael van de Poppe (@CryptoMichNL) July 26, 2022
CryptoISO express a similar sentiment regarding the stock’s correlation with Bitcoin and the importance of the $21,500 zone for BTC price.
Part of longing the 21.5k zone on BTC was confluence w support on NQ.
That is gone.
Retesting a breakout now but all this looks like crap to be honest.
Selling before tomorrow is interesting though.
If you are bullish you want to see that but earnings is driving it so far. pic.twitter.com/rh5d3wKgjG
— CryptoISO (@crypto_iso) July 26, 2022
Fractal lovers will note that the price action within the current range is eerily similar to trading within the range from May 8 to July 12 and the subsequent breakout that took place on July 12, but analysts will be quick to point out that Back-to-back calamities like Voyager, Celsius, and the 3AC crash all played a major role in that sell-off, while now there seem to be no discernible black swan events on the horizon.
However, both 34-42 days of sideways trading reflection periods and on many occasions, veteran trader Peter Brandt has identified the current market structure as a “bearish rectangle” technical analysis pattern.
In the event that the pattern breaks down from the current range, this would put the price in the $14,500 to $13,000 zone that some traders have been craving.
Ultimately, last week’s range breakout at $24,200 (July 20) pierced the upper band of the Bollinger Bands momentum indicator and now that the price is below the midline, there is a greater chance that BTC can trade towards the lower band which conveniently resides at the bottom of the current range ($24,200 to $18,600).
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