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Bitcoin hits $45K ahead of July inflation report, but one fractal hints at looming correction

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Bitcoin hits $45K ahead of July inflation report, but one fractal hints at looming correction

Bitcoin (BTC) reached its highest level in more than two months with just a few days remaining before the July inflation report.

The top cryptocurrency climbed 1.65% to $45,363 on Aug.8, continuing the upside momentum that has already seen it jumping 21.62% from its August 5 low of $37,300.

BTC/USD daily chart. Source: TradingView.com

Momentum was strong among the Bitcoin rivals as well. Ether (ETH), the second-largest crypto by market cap, increased 29.78% from its Aug. 3 low of $2,630, crossing over $3,100 on Sunday. Its gains came after Ethereum’s London hard fork went live on Aug. 5, which should add deflationary pressure to the supply of ETH.

July inflation report, on-chain 

On Wednesday, Aug.11, the United States Bureau of Labor Statistics will release July’s inflation report, with markets forecasting a 0.5% spike. The projections appear after the consumer price index (CPI) jumped to 5.4% year-over-year in June to log its biggest increase in 13 years.

Bitcoin bulls have responded positively to the recent inflation reports. They effectively guarded the cryptocurrency against falling below $30,000 after the May 19 crash. Meanwhile, their recent efforts to push the prices above $40,000, eventually leading into a slow upside break above $45,000, indicates strong demand for Bitcoin, which appears to be breaking out of its summer slump.

Lex Moskovski, chief investment officer at Moskovski Capital, highlighted a Glassnode chart that showed dramatic spikes in entities entering the Bitcoin network, matching the growth with the rising BTC/USD rates.

Bitcoin entities net growth chart. Source: Glassnode

“Amount of new Bitcoin entities continues to hit all-time high,” Moskovski tweeted.

Additionally, on-chain analyst Willy Woo said the ongoing Bitcoin momentum should push its prices above $50,000, citing supply-demand imbalance in the market. He said that all investor cohorts were buying Bitcoin, which led to supply shock.

Related: Here’s what traders expect now that Ethereum price is over $3,000

Woo referred to a chart he posted on July 15 when Bitcoin market was correcting lower after peaking out sessional at $36,675. The graph, as shown below, highlighted events of Bitcoin liquidity shock across all the exchanges and their relation to the prices.

Woo explained:

“Fundamentals do not predict short-term price, but given enough time price discovery reverts to fundamentals. [The] exact value is $53.2k today, with a standard deviation band between $39.6k – $66.8k (68.5% confidence).”

Bearish fractal

However, the latest Bitcoin climb does carry risks of becoming a dead cat bounce based on previous top-to-bottom Fibonacci retracement fractals.

Bitcoin Fib retracement from local tops to 200-week EMA. Source: TradingView.com

After setting up record highs, Bitcoin tends to correct toward its 200-week exponential moving average (200-week EMA; the yellow wave), where it eventually bottoms out to pursue another bullish cycle.

In the past two events, the BTC/USD exchange rate posted fake recovery rallies after testing the 23.6 Fib line as support. Those upside moves failed short of turning into big bullish momentums after facing resistance at higher Fib levels.

Related: 3 reasons why Ethereum is unlikely to flip Bitcoin any time soon

For instance, in 2019, Bitcoin rebounded by more than 50% after bouncing off from its 23.6 Fib line near $7,357. But the cryptocurrency faced extreme selling pressure near its 61.8 Fib line of $10,613.  Eventually, it resumed its downtrend and crashed to as low as $3,858 in March 2020.

If the fractal repeats, Bitcoin could face extreme resistance at 61.8 Fib level at $46,792 and correct lower to retest its 200-day EMA, which currently sits below $20,000.

Independent market commentator and trader Keith Wareing suggested that an imminent bullish crossover between Bitcoin’s two weekly moving averages hints at the beginning of a multi-month bull run. Dubbed as MACD, the indicator was instrumental in predicting the 2020 bull run.

Bitcoin prices and MACD crossovers in recent history. Source: TradingView.com

“The weekly MACD is due to cross bullish on Bitcoin after tonight’s close,” opined Wareing to his followers with the price of Bitcoin so far maintaining above $44,500 at the time of writing.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bit Coin

Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

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Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

Grayscale Investments is offering investors an opportunity to invest in Bitcoin mining hardware in the bear market.

The new investment opportunity, called the Grayscale Digital Infrastructure Opportunities LLC (GDIO), is now open to qualified individual and institutional investors, even as the asset manager allows ETF-related court proceedings to run their course.

Grayscale putting capital to work

Grayscale will use investor capital from the GDIO to buy mining hardware for a minimum of three years. It will use the hardware to mine and subsequently sell bitcoin. Mining is the energy-intensive process undertaken by a computer network to create a new transaction block and verify it. The node in the network that creates the block is known as a miner. A miner is rewarded in bitcoin for his effort, which typically requires large amounts of cheap electricity and computing power.

Part of the proceeds Grayscale will earn from its efforts will be paid out quarterly to GDIO investors.

“Grayscale’s unique position at the center of the crypto ecosystem enables us to create offerings that allow investors to put capital to work through differing market cycles,” stated Michael Sonnenshein, Grayscale’s chief executive.

GDIO represents another way the company has sought to provide investors with exposure to bitcoin without directly holding the asset.

Investors can also purchase shares from its GBTC trust and gain exposure to bitcoin through Grayscale’s legally regulated business in the U.S.

But Grayscale has a problem. Because investors cannot redeem shares in the trust for bitcoin, the price per share has dropped drastically, trading at a discount of 35% to its Net Asset Value. 

At the close of the trading day on Oct. 5, shares were trading at a shade over $12, despite being backed by $18.45 worth of bitcoin.

To mitigate this discount, Grayscale has pursued the conversion of GBTC into a spot bitcoin exchange-traded fund, which has so far been unsuccessful. The U.S. Securities and Exchange Commission denied the company’s latest application in June 2022, prompting Grayscale to pursue legal action against the federal agency. 

Nic Carter of Castle Island Ventures, a venture capital firm focused on early-stage public blockchain startups, said that Grayscale could wind down the ETF:

watching the GBTC discount. looks like ATL at -35%. on top of discounted spot BTC. paths to breaking open the piggy bank: SEC can approve ETF conversion, or Grayscale can wind down the trust themselves if they so choose.

— nic carter (@nic__carter) June 17, 2022

The SEC maintains that spot bitcoin ETFs are prone to underlying market manipulation.

Grayscale undeterred by SEC rejection

Despite consistent resistance from U.S. regulators, Grayscale launched its first European ETF in May 2022, which tracks the Bloomberg Grayscale Future of Finance Index, offering customers exposure to institutions at the crossroads of finance, technology, and cryptocurrencies.

Grayscale raised investors’ eyebrows recently when it announced that it had applied with the SEC to distribute 3 million ETHPoW tokens that were distributed to all Ethereum (ETH) holders after the controversial proof-of-work fork went live. 

At the time, Grayscale said it was seeking the rights to sell the tokens and pay out shareholders. 

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Colorado is accepting crypto for tax payments — it could be a mess or a shining example

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Colorado is accepting crypto for tax payments —  it could be a mess or a shining example

Colorado is now accepting crypto for tax payments — but if you choose to use that option, it could change the amount you owe…
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BNB Chain confirms BSC halt due to ‘potential exploit’

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BNB Chain confirms BSC halt due to ‘potential exploit’

Rumors of a significant hack on the BNB Chain were confirmed by the blockchain’s team, with all deposits and withdrawals suspended on the network…
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