Appetite for Bitcoin weak amid high volatility
If Bitcoin doesn't rise above $62,066, it can likely retests the $49,917 daily support level
Bitcoin’s volatility has been elevated particularly this month. The crypto asset’s price fluctuation affirms a high uncertainty surrounding macroeconomic conditions, especially in light of comments made by the U.S. Fed official over the weekend.
Bitcoin tested the $57.8K level late last week before rising above 60K but trading below $59K on Tuesday. Traders speculate whether Bitcoin will revisit its August low of $49,248, particularly given the waning interest in long-term leveraged Bitcoin positions and the mounting possibility of a global stock market correction.
Risk appetite has dampened lately as JPMorgan economists increased the likelihood of a US economic recession in 2024 to 35%. The report identified two major factors: a restrictive policy by the Fed and weak labor market conditions.
Resistance for bitcoin has been established at the $62K, 61.8% Fibonacci retracement level, drawn from the swing high of $70K on July 29 to the low of $49,101 on August 5.
The broken trendline, the 100-day Exponential Moving Average at roughly $62,659, and the $62,066 level acting as resistance could lead to more selling pressure.
If the price doesn’t rise above $62,066, it can likely retest the $49,917 daily support level. The Awesome Oscillator and Relative Strength Index (RSI) on the daily chart, trading below their neutral levels of 0 and 50, respectively, indicating a strong bearish trend.
The labor market is still weak and inflation risks are present. Fed Governor Michelle Bowman, believes such a narrative lessens the chance of an interest rate cut in September. Investors are waiting for the August release of the US Producer Price Index in a holding pattern.
The Fed’s ability to meet market expectations of at least two rate cuts by the end of 2024 is anticipated to be revealed by these data points.
The moderation in excessive leverage in the market could be one reason for the current neutral sentiment. Given that both bulls and bears have liquidated more $650 million in Bitcoin futures, it is likely that the recent volatility has decreased demand for leverage. This, however, falls short of explaining why the open interest in Bitcoin futures is currently $28.8 billion.
However, CME data indicates that Bitcoin derivatives are becoming less dependent on retail trading. That is to say, even if Bitcoin’s volatility continues, there is no indication that traders will become more bearish or that excessive liquidation could lead to a series of sell-offs that could take the price down to $50K.
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