Bitcoin: Preparing For Next Week

👇1-12) Our initial downside target of $55,000 has been reached. A countertrend rally is likely as Bitcoin appears oversold in the short term, and a potential macroeconomic tailwind is expected next week. Additionally, the SEC might approve the Ethereum ETF, which could trigger positive momentum in the short term. However, in the medium term, we do not believe this marks a significant buying opportunity.

Bitcoin and US CPI (inflation) data releases

👇2-12) The previously observed pattern, where higher year-over-year CPI prints compared to the previous month resulted in negative price moves for Bitcoin and lower CPI prints led to positive moves, was invalidated last month. Despite a lower CPI reading of 3.3% compared to the previous month's 3.4%, Bitcoin still fell from 68,000 following the CPI release on June 12.

👇3-12) We anticipate a strong likelihood that the next inflation print on July 11 will show a deceleration from 3.3% to either 3.2% or even 3.1%. This period, extending until late September, presents an opportunity for lower inflation figures due to favorable year-over-year comparisons. Consequently, traders should consider CPI data release dates as potentially bullish for Bitcoin, despite the recent breaches of long-term technical support levels.

US CPI (inflation, purple) vs. 10x Research model (purple)

👇4-12) Our 10x Research inflation model (white) continues to show lower figures compared to the official CPI data (purple), which has likely been influenced by structural inflation pressures from the COVID period. This divergence gives us confidence that the CPI will report a lower figure on July 11.

👇5-12) This should provide support for Bitcoin and other deflationary assets, maintaining expectations for a potential Fed rate cut in September and/or December. Fed Chair Powell may prepare the market for this possibility during the July 31 FOMC meeting.

👇6-12) Seasonally, Bitcoin prices have tended to weaken in August and September. Any rate cut rally could push Bitcoin near $60,000, though prices may struggle to sustain above this level. The bond market is currently pricing in two rate cuts for this year, following last Friday’s disappointing employment data, which included downward revisions and a higher-than-expected unemployment rate of 4.1%.

👇7-12) Bitcoin has declined by 20% over the past month, with 13% of this loss occurring during Asian trading hours, suggesting that many retail traders in Asia have been liquidated. Similarly, Ethereum has lost 22%, with 16% of that loss during Asian trading hours. 65% of those declines have occurred during Asian trading hours!

Bitcoin performance during various trading hours

👇8-12) Our main concern was the over-positioning in Bitcoin and Ethereum perpetual futures. The recent price decline below $60,000 has triggered significant futures liquidations, with $3.7 billion in Ethereum futures open interest and $4.3 billion in Bitcoin futures being liquidated since their respective peaks in May and June 2024.

👇9-12) Last week, $1 billion in USDC was minted, indicating that US institutional investors might have bought the dip, while USDT minting remained negligible. Overall, our money flow indicator has recorded four consecutive weeks of net liquidity outflows, explaining the weakness in crypto markets.

👇10-12) Although we may see further unwinding of perpetual futures, with $9.2 billion deployed since the ETF futures launch in January, the rate of liquidity outflows should slow, reducing downward pressure on Bitcoin and Ethereum prices.

👇11-12) Our short-term reversal indicators are deeply negative, suggesting a potential rebound in Bitcoin before a possible second leg down. The RSI is at 33%, its lowest level since August 2023, when concerns about China’s property market caused a 15% decline in Bitcoin.

👇12-12) As long as Bitcoin remains below $61,000, we expect a drop to $50,000 during August/September. Another upward move could occur if macro liquidity overwhelms the market. However, if the US economy faces a recession, Bitcoin could drop significantly lower. Nonetheless, Bitcoin is currently oversold with two potential upside catalysts—the US CPI data and the SEC’s potential approval of the Ethereum ETF—which might trigger short-covering and a brief rally.