FX.co ★ Bitcoin: Bear cycle bottom vs. Bull trap

Bitcoin after falling on Tuesday still managed to stay above the July lows. Quotes recovered slightly on Wednesday. Now the trading range for the main cryptocurrency remains within 18,595-20,700, where BTCUSD has a sufficient margin for resistance.

In the meantime, opinions are divided about whether bitcoin has bottomed out. From a technical standpoint, hopes that the lows of the bearish cycle have been reached remain valid until the price breaks and consolidates below the June highs. From this point of view, quotes can still go to support 17,592 and even test its strength with false breakouts.

Bitcoin whales protect positions, "forming a local bottom"

According to one of the crypto analysts, avoiding "setting a local bottom" from falling out of positions was a standard practice for previous BTC price lows.

Bitcoin whales are betting on a rebound right now as recent data shows "classic" bottoming behavior.

According to analytics platform CryptoQuant, major investors are moving coins en masse to derivatives exchanges this month. They defend their positions by "forming a local bottom".

In one of his September 7 reports, CryptoQuant analyst Maartunn noted a notable increase in the average monthly number of transactions made between spot exchanges and derivatives platforms.

The whales, Maartunn argued, were hedging their losses and moving funds to be used in futures bets.

"A typical phenomenon for local lows is a surge in the average value of the flow of exchanges to derivative exchanges (30-day moving average). And you know what, it's happening right now."

On Ethereum (ETH), derivatives exchanges have already seen an increase in inflows ahead of the Merge event scheduled for next week. As such, the ETH markets currently outperform bitcoin by almost three months, explains Maartunn.

"The assumption in this thesis is that whales will contribute bitcoin to derivatives exchanges in order to open futures (long) positions and be able to protect them by forming a local bottom.".

In the meantime, Whalemap has confirmed key levels of support in the network based on the accumulation of high volumes in the past. They are at $19,000, $16,000 and $13,000.

Bitcoin bottom vs bull trap

Meanwhile, analysts continue to debate whether the bottom has been reached.

Renowned crypto influencer Michael van de Poppe, CEO of Eight Global, believes the bottom has indeed been reached. He highlights the strong performance of Ethereum and other altcoins as the reason for this.

Moreover, he highlights yesterday's fall in the dollar as another reason for the rise in prices for bitcoin and other cryptocurrencies. De Poppe recommends that investors open long positions in cryptocurrencies.

However, the expert may be in the minority on this issue. The demonstration of the strength of the dollar is associated with the quantitative tightening of the Fed. There is no sign that the Fed will abandon its hawkish stance.

The CME FedWatch tool still shows expectations for an aggressive 75 basis point interest rate hike. And as the Fed continues its quantitative tightening, the dollar is expected to rise.

Another crypto influencer, il Capo of Crypto, believes the bear cycle lows are yet to come. He expects a short-term bullish scenario for the price of the main cryptocurrency to the $22,500-22,000 range, after which it will fall to new lows.

In the meantime, it is almost certain that the price of bitcoin now depends on the strength of the dollar. The release of US inflation data on September 13 may have a strong impact on the dynamics of quotes.

Michael Burry: economic disaster is coming

Well-known investor and founder of Scion Asset Management Michael Burry does not share the optimism towards the cryptocurrency market. Instead, he issues another dire warning for the economy.

Burry predicted a 2008-level economic crash. He based his predictions on the crashes of cryptocurrencies, meme stocks, and the SPAC market. Moreover, he believes that inflation, which has cooled down a bit, will begin to grow rapidly again.

Burry notes that inflation works in bursts. The temporary relief is not the result of an improvement in the economy, but is related to the nature of the indicator. He also refuses to give credit to the Biden administration or the Federal Reserve for lowering the inflation rate.

Inflation has a significant impact on the cryptocurrency market. The cryptocurrency market is highly correlated with the overall market and depends on macroeconomic factors. In turn, the Fed is responsible for controlling inflation in the United States. This is usually achieved through higher interest rates and quantitative tightening.

High interest rates can lead to a fall in the stock market and cryptocurrencies. A higher-than-usual interest rate hike in June led to a major crash in the crypto market.

Parallel inflation data point to a slight slowdown. CPI data released in August came in below the forecast.

Despite this, the Fed has remained hawkish as it aims for a 2% inflation rate and will be ready to tighten monetary policy until then.

If Burry's warning does come true, the Fed could take an even tougher stance. Many experts are already wary of a 100 basis point rate hike at the September FOMC meeting.

Burry's warnings don't end there. He also predicts that the bottom has not yet been reached. According to him, this will happen when massive disruptions are observed in all industries. The collapse of two SPAC ETFs is not enough to set the bottom.