Bitcoin stabilizes at 19k USD! Will crypto bounce back?
Looking at the quotations of the oldest virtual currency, we can see that the BTC rate has lowered over the last eight months by over $50,000, i.e. over 74%, from $69,000 to below $18,000, the lowest level since December 2020.
This sale stopped only around the technical support determined based on the December 2017 peaks. However, it is worth noting that the demand response that appeared in this support area is exceptionally modest.
This fact left Bitcoin in a horizontal trend between $19,000 support and $22,000 resistance. It is noteworthy that consolidations are corrective formations, which means that the market is more likely to break out of these systems in the direction consistent with the previous move.
Considering that the previous impulse was downward, there is a statistically higher probability that the BTC rate will break the bottom; I.e. it will drop below $19,000, which in turn could signal a potential for further drops to the next support area, which is located in the region of $12,000.
A situation from May can serve as an example confirming the thesis described above. After a dynamic decline, Bitcoin stuck for a month from consolidation and broke from it, i.e. in the direction consistent with the previous impulse.
Statistics also support the continuation of the downward movement:
• In 2011, after the so-called first burst of the bubble, BTC fell by almost 94%
• In 2013, when the second bubble burst, the decline amounted to over 83%.
• In 2014, when the third bubble burst, Bitcoin fell by almost 93%.
• In 2017, when the fourth bubble burst, the decline amounted to almost 84%.
So it turns out the current decline of 74% since the November peaks has not even matched the previous sell-offs observed over the years on the quotations of the oldest virtual currency.
If Bitcoin, however, slipped to another support located around $12,000, then the depreciation range observed since November would exceed 82%
Another argument supporting the view of further depreciation is the policy of central banks, which raise interest rates in response to high inflation, thus contributing to a decrease in liquidity, which in turn leads to the decline in the quotations of risky assets such as stocks or cryptocurrencies.
What will happen on the market on July 13 this year may be significant. On this day, we will learn the latest report on consumer inflation in the United States. Suppose economists’ expectations pointing to a further increase in the index are confirmed. In that case, the Fed will be even more determined to further aggressive tightening of monetary policy by continuing the circus of raising interest rates.
Reuters economists believe the Federal Reserve would make five more increases in interest rates in this cycle. It would raise the federal funds’ rates by 75 basis points in July, half a percentage point in September, and will return to increases by a quarter of a percentage point earliest in November.
According to experts, the Fed will stop the increases in the second and third quarters of 2023 and then cut rates by 25 basis points in the last quarter of next year.
Looking at the Ethereum quotes, we can see that the price of this cryptocurrency has dropped over the last eight months by almost $4,000, i.e. nearly 82%, from almost $4,900 to below $900, the lowest level since early January 2021.
ETH drop stopped in the technical support area of $1,000 — there, on June 19, there was a demand response. However, the subsequent rebound turned out to be only temporary. As a result, ETH — similarly to BTC — was stuck in a consolidation between $1,000 support and $1,250 resistance, measuring 38.2% Fibonacci retracements from an earlier downward impulse.
This fact means that, as in the case of BTC, statistically, there is a greater probability that the market will break the bottom, which could drive another downward impulse.
The potential for further depreciation could be around $800, or even $350 where a technical support area is located.
The range of depreciation is therefore considerable, although taking into account the potential extent of Bitcoin’s decline and the strong positive correlation between the two cryptocurrencies, it seems realistic to be achieved in the next few months.
Looking at the Cardano (ADA) quotes, we notice it is stuck in consolidation, within which another consolidation has appeared. But let’s start from the beginning.
What makes Cardano different from other crypto is that Cardano has been in a downward trend since the beginning of September last year and not, like most cryptocurrency projects, from mid-November.
This sale caused the ADA rate to drop by more than 87%, falling from $3.10 below $0.39.
Although in mid-May this year, there was a demand reaction that started a rebound, later increases turned out to be only temporary. This fact also made Cardano stall in a consolidation between support at $0.45 and resistance in the region of $0.65.
It is noteworthy that within this consolidation, another — smaller one has emerged recently. It is between the support of $0.45 and the resistance in the region of $0.55.
So one can see that both consolidations have two common features. They share the same lower bound — support of $0.45 — and the fact that both are corrective patterns after previous declines.
This fact makes it statistically more likely that the market will break down, which could drive a further sell-off towards $0.40, $0.30, $0.25, or even further to $0.19. It is where the next levels of support are located.
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