Is Bitcoin Set to Go Lower Before it Goes Higher?
According to Rob Ginsberg, a Wolfe Research analyst, Bitcoin may experience further decline in the near-term. Despite already losing more than 11% in just a month, Ginsberg believes that the world’s largest cryptocurrency will eventually break out and rise in value. However, in the immediate future, he anticipates more weakness in Bitcoin’s price.
Bitcoin’s Possible Weakness Ahead
Ginsberg explains in a research note that although there is a chance for Bitcoin to break out and increase in value, it is more likely to go lower first:
“Could it finally breakout and expand higher? Certainly, but likely not before it goes lower, as has been the trend.”
It’s worth noting that Bitcoin has experienced significant rallies after periods of consolidation in the past. Another crypto analyst, Christopher Jaszczynski, also expressed caution about Bitcoin’s current situation.
Potential Headwinds for Bitcoin
In recent U.S. Federal Reserve minutes from its July meeting, members indicated the possibility of further interest rate hikes, which could pose a challenge for Bitcoin. Additionally, Ginsberg highlighted the strengthening U.S. dollar as another obstacle for the cryptocurrency.
“These near-term headwinds are likely to force price lower and keep volume muted across the space. If history is any indication, however, when price does expand, expect it to be abrupt.”
Ginsberg also mentioned that the $31,000 level is crucial to watch, as Bitcoin has been rejected multiple times at this resistance level throughout the year.
Why Bitcoin’s Price Could Experience a Temporary Dip
Bitcoin has had an impressive run over the past year, but it’s not immune to short-term price corrections. Here are a few reasons why Bitcoin’s price might go lower before it goes higher:
- Market consolidation: After significant price surges, it’s common for the market to consolidate, allowing traders and investors to take profits. This consolidation period often leads to price retracements.
- Technical resistance: Bitcoin’s price has repeatedly failed to break past the $31,000 level, which has become a key resistance. Traders may be hesitant to enter new positions until this resistance level is decisively broken.
- Global economic uncertainty: Factors like the U.S. Federal Reserve hinting at potential interest rate hikes and the strength of the U.S. dollar can create uncertainty in the global economy. During uncertain times, investors may choose to sell off their riskier assets, including Bitcoin.
What to Expect When Bitcoin Recovers
While Bitcoin may experience a temporary dip in price, history has shown that it tends to have sharp and sudden recoveries. Here’s what you can anticipate when Bitcoin starts to regain its momentum:
- Rapid price appreciation: When Bitcoin breaks out of its consolidation phase, it often sees rapid price appreciation. This can happen abruptly and catch many traders off guard.
- Increase in trading volume: As Bitcoin’s price starts to rise, trading volume usually picks up. This is a result of increased market participation as traders and investors jump back into the market.
- Positive market sentiment: A recovery in Bitcoin’s price often boosts market sentiment. Optimism and excitement among market participants can contribute to further price increases.
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