Analyst: Bitcoin may still fall by $5,000 in the short term

Original author: Mary Liu, BitpushNews

Financial markets reacted positively to the release of the July Producer Price Index (PPI) report on Tuesday, with cryptocurrencies and U.S. stocks climbing after the PPI showed a continued cooling of U.S. inflation.

U.S. stocks opened higher and continued to rise. At the close, the SP, Dow Jones and Nasdaq indices all rose, up 1.68%, 1.04% and 2.43% respectively.

According to Bitpush data, the bulls pushed Bitcoin to an intraday high of $61,630, but encountered upward resistance. As of press time, Bitcoin is trading at $60,644, up 2.74% in the past 24 hours.

On Tuesday, the top 200 tokens by market capitalization generally rose. Among them, GMX (GMX) rose the most, up 13.2%, followed by THORChain (RUNE) up 12.2%, and Stacks (STX) up 11.1%. Convex Finance (CVX) fell the most, down 6%, Sui (SUI) fell 5.7%, and Threshold (T) fell 3.1%.

The current overall market value of cryptocurrencies is 2.14 trillion US dollars, and Bitcoins market share is 56.12%.

Analyst: Bitcoin is more likely to fall to $5,000 than rise to $5,000

One analyst expects Bitcoin prices to drop by another $5,000 in the short term.

“Bitcoin is more likely to fall by $5,000 than rise by the same amount,” Alex Kuptsikevich, senior market analyst at FxPro, said in an email.

Kuptsikevich’s bearish view stems from Bitcoin’s failure to maintain gains above $60, 000 following a death cross, a bearish crossover of the 50-day and 200-day simple moving averages (SMAs).

“Bitcoin failed to break above $60,000 and faced a sell-off after attempting to break above the 50-day and 200-day moving averages late last week, showing seller dominance,” Kuptsikevich noted.

Kuptsikevich added that the 14-day relative strength index (RSI) no longer indicates oversold conditions, which means there is room for further declines, consistent with the recent dominance of sellers above $60,000.

The 14-day RSI is a momentum oscillator that measures the speed and variability of price movements. After last Mondays plunge, the RSI fell below 30, suggesting an oversold market, which usually signals a pause in a downtrend and a recovery in prices.

Explaining his bearish view, Kuptsikevich said: “The RSI on the daily timeframe has moved out of the oversold territory and is losing momentum for further strength.”

Bitcoin lags behind gold

There has been a lot of discussion in recent weeks about gold and Bitcoin as strategic reserve assets, mainly due to political uncertainty ahead of the U.S. election. Gold has long been considered a reliable store of value, but Bitcoin, which claims to have similar functions, has struggled to keep up with golds recent upward momentum.

Kaiko analysts wrote: “Bitcoin has underperformed gold during the recent sell-off, rising in tandem with technology stocks. The Bitcoin/Gold ratio, which measures the relative performance of the two assets, fell to its lowest level since February on August 5, although it has risen slightly since then. When the ratio falls, Bitcoin underperforms, and vice versa.”

They questioned: “Does the recent underperformance mean that Bitcoin is losing its safe-haven appeal? While most ETF issuers market Bitcoin as a complement or alternative to gold, the two assets have different fundamental drivers.”

“This is evident from the 60-day correlation between Bitcoin and gold, which is fairly weak, fluctuating between -0.3 and 0.3 over the past two years,” they said. “Bitcoin’s price is closely correlated with the U.S. market and has benefited significantly from increased institutional adoption following the launch of the spot ETF in January.”

“In contrast, gold has proven resilient amid tightening global monetary policy, driven by strong central bank demand. Central bank gold purchases doubled in 2022 and remained high in 2023,” Kaiko analysts said.

Charles Edwards, founder of Capriole Investments, said that based on past correlations with gold, Bitcoins prospects may soon improve. Edwardss XAU/USD and BTC/USD overlay chart shows that Bitcoin tends to have a latency period of about three months after gold rises.

William Clemente, co-founder of cryptocurrency research firm Reflexivity, added to Edwards’s sentiments by comparing Bitcoin’s performance following the launch of the BTC ETF to gold’s performance following the launch of the gold ETF in 2004, noting that it took 10-12 months for gold to experience a significant rally.

Charlie Bilello, chief market strategist at wealth management firm Creative Planning, tweeted: “Bitcoin and gold are now the best performing major assets in 2024. Looking back to 2011, we have never seen these two assets ranked first or second in any year.”