Bitcoin's recent drop indicates potential risk of $100K decline amidst overall positive economic outlook
Bitcoin, the world's largest cryptocurrency, has experienced a significant drop in value, falling by 13% from its recent peak of $124,000 to $108,000 on August 29. This decline has sparked a flurry of discussions and analyses within the crypto community.
According to Glassnode data, the level of $108,900 holds significance for Bitcoin. This is the short-term holder cost basis, which could potentially act as either support or resistance for the digital currency. If Bitcoin fails to hold above this level, it could set the stage for further decline.
The bullish case for Bitcoin requires $108,700 to hold as support and the reappearance of the golden cross on the MVRV Momentum indicator. A break below this level could trigger distress selling, potentially leading to sustained weakness. If the support at $108,900 breaks, the mid-term bottom could be around $93,000-$95,000, according to the statistical band.
The drop follows a broader sell-off in the market, possibly due to July's inflation data. Despite this near-term risk of a distress sell-off, the overall macro landscape remains positive in the mid-term, as stated by several macro analysts.
Alex Kruger, a well-known analyst, predicts that the current Bitcoin cycle could extend until approximately 2026. This optimistic outlook is shared by Ali Martinez, who, like Kruger, has called for market tops in the past. Martinez cites RSI divergence and price action similar to the 2021 market peak as reasons for his prediction.
JP Morgan, on the other hand, projects that Bitcoin could reach $126,000 by the end of the year. However, if the correlation with the 2021 cycle peak remains positive, Bitcoin could retreat and bottom out around $70,000.
The U.S. Treasury borrowing from the public could drain dollar liquidity and strain risk assets in the coming weeks. This could have a more significant impact on Bitcoin than the 2021 correlation, according to Swissblock analysts.
Crypto Twitter is currently flooded with "market top" calls, adding to the uncertainty surrounding Bitcoin's future. However, the market consensus for a 25 bps interest rate cut in September is nearly 90%, which could potentially provide a boost to the market.
Despite the current correction, which falls within the 30% range seen in past bull markets, the cycle is far from over, as suggested by Kruger. The correction is a reminder of the volatility inherent in Bitcoin, but it also presents an opportunity for investors who view this as a dip rather than the end of the bull run.
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