Chart indicators show bitcoin could be beset by a new wave of sell-offs, analyst says

The formation of a "death cross" between the 50-day and 200-day moving averages signals potential further downside in the crypto market, despite a brief rebound, according to an analyst.

"Two fairly popular moving averages, the 50 and 200 day moving averages, have drawn the so-called 'death cross,' which does not add optimism to the crypto market in the medium term," YouHodler Risk Manager Sergei Gorev told The Block.

Gorev noted that while Bitcoin market charts may indicate a potential rebound after the recent price drop, "we may soon see a new wave of cryptocurrency sales."

Bitcoin traded around $58,436 at publication time, down around 3% over the past day, according to The Block's Bitcoin Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, decreased 2.47% to 112.55 in the same period.

"Bitcoin open interest is decreasing more than token price depreciation, showing less confidence and interest from investors as volatility remains high. Trading volume was also lower than most weekends, showing that the small sell-off is not supported by strong bear action," BRN analyst Valentin Fournier said.

Fournier noted that the market is likely to remain volatile in August and September, and that bitcoin could trend within a range as wide as $49,000 to $69,000.

"Bitcoin has more room to expand before heading back to a lower range, we recommend using this small dip as one more occasion to progressively increase exposure," the analyst added.

Last Monday, the bitcoin futures funding rate turned sharply negative. However, according to Coinglass data, the funding rate has flipped back to positive since Friday, indicating that investor sentiment has shifted back to a more positive outlook.

Macroeconomic environment catalysts for bitcoin

According to Lawant, U.S. monetary policy and the outcome of the upcoming presidential election are factors that could significantly impact the cryptocurrency market, potentially moving it out of its current trading range.

He highlighted forecasts by interest rate traders, with the CME FedWatch tool showing a 51.5% likelihood of a 25 basis point cut in September and a 48.5% chance of a 50 basis point cut. A lower interest rate environment could make traditional financial assets like bonds and savings accounts less attractive, potentially driving investors to seek higher returns in risk assets like stocks and bitcoin. Lawant added that Fed Funds CME futures are also implying a 14% chance that the central bank will have slashed rates by 75 basis points in total between now and its November meeting, which will take place only two days after the U.S. presidential election.

Lawant noted that the almost equal odds between Kamala Harris and Donald Trump in the U.S. presidential election in November are adding more uncertainty to the digital asset space, as Harris' stance on bitcoin is viewed as less favorable compared to Trump's.

"It is looking likely that a decisive break from the current trend will be linked to these two topics," the analyst added.

Traders will be given more insight into the likelihood and scale of potential rate cuts with the release of July’s U.S. Consumer Price Index (CPI) readings on Wednesday. A cooler-than-expected reading could increase the Fed's confidence when initiating a rate-cut cycle, particularly in light of recessionary signals.

The U.S. unemployment rate rose to 4.3% in July and hiring slowed. According to U.S. Global Investors CEO Frank Holmes, this triggered the Sahm Rule, an indicator that — when applied to historical data — has accurately predicted nearly every U.S. recession since the 1950s.

Factors that could affect an altcoin recovery 

Meanwhile, Solana led losses among major cryptocurrencies sliding 4% over the past 24 hours, according to The Block's Prices Page. Regarding the potential for a sustained recovery in altcoins, FalconX Head of Research David Lawant said that an improvement in narratives and liquidity trends is necessary, along with addressing the potential futures selling pressure from early investors.

"However, as fully-diluted valuations start to approach pre-bull market levels, it could be time to watch this market more closely from here on," he added.

The Sui token has bucked the general downtrend in the cryptocurrency market, with the cryptocurrency surging as much as 8% in the past 24 hours and 82% over the past week, according to The Block's Price Page. On Wednesday, Grayscale added Bittensor and Sui to its list of crypto investment products, with its Grayscale Sui Trust focusing exclusively on the protocol's native token.