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Bitcoin remains in larger corrective channel, despite bulls' strong defense of $60K level.
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Ethereum, too, forms broad corrective pattern.
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Will Mt.Gox fuel a supply spiral for Bitcoin?
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In last week's analysis, we highlighted potential short-term scenarios for Bitcoin and Ethereum with a focus on the potential support levels. Fast forward to today, and both are still experiencing corrective moves after taking out some of these levels on the way down.
The primary factors driving the downturn remain unchanged: ETF outflows, a hawkish Fed, and the realization of liabilities from the collapsed Mt.Gox exchange, which may accelerate with the start of the new month.
While longer-term sentiment remains bullish, supported by analysts from Bernstein and JP Morgan, breaking key technical levels could deepen the current declines.
Additionally, significant macroeconomic data from the US, scheduled for release on Thursday and Friday, is expected to increase volatility across the digital currency market.
Let's take a look at the main fundamental and technical factors traders should watch out for in the coming days.
Mt.Gox: A Persistent Concern for the Market
Mt.Gox, a digital currency trading exchange that collapsed in 2014, has begun repaying creditors after more than a decade. The critical question is: why could this favor the supply side?
Firstly, the total value of the coins in question is just under $10 billion, which, given the reduced volatility during the holiday season, represents a substantial injection of liquidity.
Moreover, since the value of Bitcoin has surged since 2014, many funds that will end up in so-called cold wallets may be poised to realize profits. If the anticipated accelerated withdrawals in July materialize, the market could remain susceptible to supply shocks.
It is also important to note that market volatility in the cryptocurrency sector is not only driven by individual or institutional investors. For instance, Germany, which officially holds $2.8 billion worth of Bitcoin, recently sold a relatively small amount of 900 units. However, a larger sell-off could significantly impact the market.
Technical View: Bitcoin Bulls Defend $60,000 Level
A notable rebound near the local demand zone has temporarily halted the dynamic declines in Bitcoin's prices, which continue to trade within a broad consolidation range. It is still too early to declare a trend reversal to a downtrend.
From a technical perspective, buyers' challenges may intensify if the lower limit of the current sideways trend, based on this year's May/April lows of $57,000, is breached.
A signal for a bullish reversal would be the negation of the recent supply impulse and a breakout above the short-term downtrend line.
Ethereum Stuck Within Downward Channel
Despite recent declines, Ethereum remains stuck within a larger corrective price channel.
Sellers face a strong cluster of demand zones around the $3200 level per coin, where the market's reaction will be crucial for the future development of the downward movement.
If the bears break through the indicated area and the lower limits of the channel, it will be a significant bearish signal, potentially targeting the lows just above $2800.
Conversely, a breakout above the upper limit of the channel would signal a bullish move, indicating a possible return to the uptrend.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.