Bitcoin (BTC) enters the second week of July in a dangerous place with traders scared of further BTC price downside.
After its lowest weekly close in four months, BTC/USD is giving bulls nightmares as unrealized losses mount and with forecasts of more pain ahead.
Where will the market end up?
The trading community, already surprised at the extent of recent losses, is nonetheless primed for lower levels. Historically, the current drawdown is still small, leaving the path open for a trip toward — or even below — $50,000.
With such an unsavory situation in the back of their minds, longtime market participants are waiting to see how major players weather the storm.
In focus are various investor cohorts: both speculators and a portion of Bitcoin’s “diamond hands” are now underwater on their holdings.
At the root of the downtrend appears to be a combination of selling by the United States and German governments, as well as reimbursements of bitcoins owed to creditors of defunct exchange Mt. Gox.
Sentiment underscores market sensitivity to these topics: the Crypto Fear & Greed Index is knocking on “extreme fear,” having dived 60% over the past month.
As uncertainty over how these forces will play out prevails, Cointelegraph takes a look at various opinions as to how BTC price strength might react.
Bitcoin: More downside “probable”
Bitcoin looked as if it might be back in action over the weekend as a $5,000 bounce from prior lows made traders hopeful.
Everything changed at the weekly close, however, with BTC/USD returning to $54,300, going on to trade around $2,000 higher on heightened volatility, per data from Cointelegraph Markets Pro and TradingView.
“With Bitcoin closing its weekly below the May low, the strength on Friday makes we think more of a dead cat bounce and continuation lower over the next few weeks,” popular commentator Mark Cullen wrote in part of a gloomy response on X (formerly Twitter).
Research firm Santiment underscored the scope of the poor performance on both Bitcoin and altcoins.
“After a brief bounce to get trader hopes up, crypto has again shown retraces to bring fear back on the menus as the weekend comes to a close. Bitcoin is -2.3% in the past 24 hours, -8.6% in the past week, and -18.4% in the past month,” it summarized.
“Most altcoins have shown far larger dips.”
With that, per popular trader Tony “The Bull” Severino, it is time to brace for impact.
“Bitcoin closed below the lower Bollinger Band on the weekly,” he warned alongside a chart showing the Bollinger Bands volatility indicator.
“This is a sell signal. More downside is probable.”
Fellow trader and commentator Matthew Hyland, known for his normally-optimistic price perspectives, had similar news for X followers.
“BTC has confirmed a weekly breakdown out of the multi-month consolidation range,” he acknowledged.
“BTC still remains in an uptrend, it would need to go below $38k to end the uptrend so the uptrend is still fully intact however with this weekly breakdown it opens the doors for lower price targets.”
Sub-$50,000 BTC price targets hinge on RSI
On the topic of where BTC/USD could put in a floor during the latest correction, traders diverge.
As Cointelegraph reported, $45,000 is emerging as one of the more popular assumptions, this based on drawdowns from previous highs in the past.
“The Weekly close for Bitcoin was ugly,” Keith Alan, co-founder of trading resource Material Indicators, wrote on the topic.
“There's a lot of chatter on CT about the bottom being in, but I'm not seeing any validated confirmation of that yet. A retest of support could give us the confirmation we are looking for, but I'm not confident $53.5k will hold.”
Alan, along with Hyland, flagged the relative strength index (RSI) for signals that Bitcoin is truly “oversold” at current levels.
“I'm watching the Weekly RSI very closely,” he confirmed alongside a chart of one of Material Indicators’ proprietary trading tools showing potential bounce zones.
“If 42 on the Weekly RSI doesn't hold, pack your bags for a trip to Bearadise.”
Weekly RSI measured 45.6 at the time of writing on July 8, with Hyland seeing the probability of lower readings to come.
“The weekly RSI has nearly pulled back to the August/September lows of last year when BTC was trading at 25k,” he noted.
“Another red weekly candle would likely push the RSI lower which would then give opportunity for Bullish Divergence.”
Bringing up the ghost of 2021, meanwhile, veteran trader Peter Brandt entertained the idea that Bitcoin’s latest all-time high formed part of another “double top” formation.
While not confirmed, he forecast a target of $44,000 if BTC/USD continued to break down.
Bitcoin speculators in the red
While the last week has sparked its fair share of liquidations among overly enthusiastic traders both long and short BTC, others have no choice but to sit and wait.
An increasingly large swathe of the Bitcoin investor base is now underwater on its holdings.
Analyzing unrealized profit and loss, Axel Adler Jr., a contributor to onchain analytics platform CryptoQuant, suggested that this could be a ticking time bomb.
“There is mild panic in the market due to the small-scale sales of Mt.Gox/Govt coins, but no one is talking about the unrealized losses of STH whales, which currently equal 218K BTC. I have no idea what will happen to the market if they lose their nerve,” he warned on X.
An accompanying chart showed unrealized profit and loss for short-term holder whales (STHs) — largescale entities hodling a given unit of BTC for 155 days or less.
On the topic of the broader STH base, now on aggregate in the red with its cost basis at around $64,000, fellow CryptoQuant contributor Mignolet offered a glimpse of hope.
The spent output profit ratio (SOPR) for the cohort, which monitors onchain transaction profitability, he noted, is now echoing behavior seen ten months ago.
“If the current cycle is still in a bullish phase and not a season out, short-term SOPR data indicates that the price is nearing the bottom. This pattern is very similar to the period in September last year,” he commented in one of CryptoQuant’s Quicktake blog posts.
CPI, PPI and Fed’s Powell line up
As if Bitcoiners did not have enough on their minds this week, the coming days will see a fresh deluge of macroeconomic data to test the resolve of risk assets.
This comes in the form of U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) prints for June on July 11-12.
Inflation remains a hot topic when it comes to market sentiment, and adding to the mix is testimony to the Senate by Jerome Powell, Chair of the Federal Reserve.
The Fed’s next meeting to decide interest rate changes is in around three weeks, making the upcoming data key to assessing the overall climate.
“Buckle up for a busy week ahead,” trading resource The Kobeissi Letter forecast on X.
The latest estimates from CME Group’s FedWatch Tool nonetheless see hardly any chance of the Fed changing rates in July, with the odds at just 6.7%.
As seen previously, unexpected macro data results have the ability to influence crypto market trends.
“We have to see how this week pans out with CPI data etc... but until otherwise I'm still betting lower to come,” commentator Cullen concluded.
Sentiment retraces bull market gains
The Crypto Fear & Greed Index is now back at the start of the Bitcoin bull market.
Despite BTC/USD being down 25% versus all-time highs from March, in that period, the classic sentiment gauge has gone from “extreme greed” to knock on “extreme fear.”
As of July 8, the Index measures just 28/100, having shed nearly 50 points in the past month to reach its lowest levels since early 2023.
The irony is plain for popular trader Moustache, however, one of the increasingly rare positive voices among the trading community.
Bitcoin is circling levels corresponding to its first high from 2021, and at that time, the sentiment was, conversely, sky-high.
“The Crypto Fear & Greed Index signals ‘Fear’ while $BTC retests its ATH from 2021. Just like in 2017...just like in 2020,” he noted in late June, drawing historical comparisons.
“I think there is hardly a more bullish sign than this.”
