Crypto Market Dips into Fear as Bitcoin (BTC) Hits Another Low: What's Next?

Positive sentiment that had been riding high as recently as last week has become fear as the Bitcoin price has fallen $11,500 in less than a week. A rebound has taken place on Wednesday morning, but will it be resilient, or will Bitcoin come crashing down out of its bull flag?

Market sinks into fear

Source: Alternative.me

The market officially became fearful on Wednesday as the Fear and Greed Index crashed from a reading of 56 to 44 in only 24 hours. It must also be remembered that the Index was sailing high in the bright green at a reading of 73 just less than a week ago.

Powell’s Jackson Hole speech will be key

The same nervousness pervades in traditional markets as investors await Fed Chairman Powell’s speech at the Jackson Hole Summit on Friday. Powell has used this forum previously to ready the market for rate cuts, although with his ongoing spat with President Trump, things have become more complicated.

A very bad data release on unemployment figures, plus extreme downward revisions of previous jobs reports may force Powell’s hand in favour of at least a 25 basis points cut in September.

That said, the recent Producer Price Index (PPI) report came in hot, with much higher prices than were forecast, causing the Fedwatch CME rate cut expectation to fall to 85%, down from almost 100%.

With all of this uncertainty persisting into the end of the week, Bitcoin might have a difficult time rallying strongly. However, if Powell does hint at a cut in September and possibly a further softening of interest rate policy into the end of the year, this could be enough to spark the next big surge for the king of the cryptocurrencies.

$BTC bounces from bottom of bull flag

Source: TradingView

The 4-hour chart for the $BTC price shows how the price sank through the deepest of the Fibonacci levels of the 0.786 and carried on to be finally halted by the bottom trendline of the bull flag. If the price does not fall back down again this dip will have avoided making a lower low, and the price can potentially just head back to the top of the flag again. 

All the shorter-term Stochastic RSI indicators have reset to the bottom, presaging upside momentum, and right at the bottom of the chart, the RSI reveals that the indicator line may be about to cross up through the downtrend, possibly signalling the end of this recent downward trend.

Daily momentum indicator about to reset

Source: TradingView

The daily chart serves here to illustrate how the $BTC price descended to the bottom of the bull flag and then retested and confirmed the next swing to the upside, as long as the current candle does not collapse back down.

At the bottom of the chart, the Stochastic RSI indicator lines are almost at the lowest point. One only has to look left to see the previous sizable upswings to understand that another one should be about to start building.

Bearish concerns in the weekly time frame

Source: TradingView

Moving out into the much higher time frame of the weekly, some concerns can be noted. In the price action, the previous weekly candle is quite bearish. If there had been no wick below it, this would have been a shooting star, generally found at the top of a rally, and an extremely bearish candle. As it stands, it is still quite bearish, and forms a double top pattern (similar to the one at the top of the falling wedge). The bulls will be hoping that the strength of the uptrend will eventually negate this pattern.

Nevertheless, more bearish signs can be found. The Stochastic RSI on this time frame has the indicators about to fall below the mid-point. When this happened at the same point for the falling wedge it initiated the crash that was to come.

Finally, looking at the MACD, it can be seen that the indicator lines are about to cross down again. The last time this happened was in the midst of the falling wedge correction. At the same time, the light green bars in the histogram could be just about to disappear, to be replaced by pink ones.

In order for all these bearish signs to be negated, Bitcoin needs a very strong rally. It may be that Friday could provide the spark to either send the $BTC price hurtling back to the highs, or crashing down much lower. Which will it be?

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.