Bitcoin enters typical summer slump

NAIROBI (— Bitcoin’s current price dip below its bull market support band (BMSB) raises questions about its potential for a Q4 rally, a pattern observed in previous years. Analyst Benjamin Cowen highlighted this trend in a recent post on X.

Cowen shared his analysis in a thread on X. Source: Benjamin Cowen

Cowen emphasized Bitcoin’s position relative to its BMSB, noting the importance of regaining this level in the coming weeks following the recent BTC price crash. The analyst compared this to past cycles, particularly the summers of 2013 and 2023, where Bitcoin’s recovery led to significant price rallies.

In 2013, Bitcoin bottomed in early July before surging above the 21-week EMA and rallying in Q4. In 2023, BTC price painted a similar pattern, with Bitcoin dropping below its BMSB in Aug before staging a strong comeback in the final quarter.

Bitcoin price BTC reversal
The analyst sees BTC’s RSI and Bullish Hammer confirming a reversal. Source: Jacob Canfield

Jacob Canfield pointed out bullish signals from Bitcoin’s Relative Strength Index (RSI), highlighting oversold bullish divergences on the daily chart as high-probability trade setups. Moreover, he predicts a potential revisit to Bitcoin’s former range high of over $70,000, if the token reclaims the daily trend.

BTC price Bitcoin volatility
Bitcoin’s high volatility suggests a historical upward trend

Another independent analyst highlighted that the Bitcoin volatility Index suggests that high volatility phases often precede the second phase of a bull market. When the Volatility Index enters high volatility territory, the metric typically signals the start of significant bullish momentum.

Rate Cut Expectations Add to Optimism

Rising interest rate cut probabilities further influence Bitcoin’s ability to resume its bull run in the coming weeks. According to CME data, as of July 8, Wall Street traders saw a 93.3% possibility of the Federal Reserve cutting interest rates by 25 basis points in September.

The probability was less than 50% a month ago. Due to a slowdown in hiring in the United States, expectations for lower interest rates have risen.

Bitcoin Federal reserve rate cut
Fed meeting target rate probabilities. Source: CME

When the job market weakens, the Federal Reserve often considers cutting interest rates to stimulate economic activity. Lower interest rates are generally bullish for Bitcoin and other riskier assets because they make traditional safe investments like US Treasury Notes less attractive.

The potential shift in monetary policy could provide additional support for Bitcoin’s recovery.

Bitcoin’s Struggle Below $56,550 Support Level

On July 5, Bitcoin plunged below the $56,552 support level but quickly rebounded as bulls purchased the dip, managing to defend the level on a closing basis. However, bears may attempt to sink and sustain the price below this level again.

If successful, the BTC/USDT pair could slide to $53,480 and potentially to solid support at $50,000. On July 8, Bitcoin’s price spiked over 7% to reach a daily high near $58,200 before correcting. The correction showcases the strength of bearish presence near the upper price levels.

BTC/USD 1-day price chart. Source: TradingView

The downsloping 20-day exponential moving average (EMA) near $61,230 indicates an advantage for the bears. However, the positive divergence on the relative strength index (RSI) suggests that bearish momentum might be slowing.

Buyers will need to push the price above the 20-day EMA to maintain the range-bound action between $56,550 and $73,780.

Bitcoin on chain
Bitcoin On-chain Indicators. Source: CryptoQuant

The aSOPR at 1.0019 indicates slight profit-taking, potentially signaling a market top. However, the Binary CDD value of 0.42857142 suggests long-term holders are retaining their coins, possibly anticipating future gains.

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