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(Kitco News) - Volatility spiked across financial markets on Wednesday amid lingering concerns about the health of the U.S. banking sector and evidence that inflation may once again be on the rise, increasing the likelihood of additional interest rate hikes by the Federal Reserve.
Stocks sold off in early trading but regained some of the lost ground in the afternoon as investors shifted their attention to July’s Consumer Price Index (CPI) report, which will be released on Thursday. Data out of China also put pressure on financial markets as the country’s consumer sector fell into deflation in July, a sign that Beijing is struggling to revive demand, which increased concerns of a prolonged slowdown that would have global implications.
The S&P, Dow and Nasdaq all closed in the red, down 0.70%, 0.54%, and 1.17%, respectively.
Data provided by TradingView shows that Bitcoin (BTC) bulls lost some ground on Wednesday as a spike in volatility pushed BTC's price to a high of $30,130, only to then reverse course and fall to a daily low of $29,351 before ultimately being bid back above support at $29,400, marking a decline of 1.7% on the 24-hour chart.
BTC/USD Chart by TradingView
“September Bitcoin futures prices traded slightly lower in the early hours on Wednesday, following good gains posted Tuesday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“While prices continue in a sideways and choppy grind, the bulls have gained a bit of upside momentum and have the slight near-term technical advantage,” Wyckoff said. “However, bulls need to show more power this week to suggest more upside can be attained in the near term. The direction in which prices break out above the resistance line or below the support line [outlined on the chart above] is likely to be the direction of the next trending price move in the market.”
According to analysts at MN Trading, “The price action on Bitcoin has been tightening, and the trading volume in the market, both on BTC and altcoins, has been significantly decreasing. This phenomenon is commonly observed during a prolonged sideways period in the market.”
“During such sideways phases, traders often become restless due to boredom,” they said. “This restlessness tends to lead traders into a cycle where they start to force trades, taking positions they might not genuinely support. This situation plays right into the hands of larger institutional players who manipulate these conditions. They exploit the impatience of inexperienced traders, leading them into making incorrect decisions and essentially trapping them.”
This can be seen on an assets’ chart in the form of an accumulation, manipulation, and distribution (AMD) pattern.
BTC/USDT 4-hour chart. Source: MN Trading
“The AMD pattern is formed by larger players to trap inexperienced traders,” the analyst said. “On BTC, we are seeing that the manipulation phase seems to be over as we have experienced a strong push that reclaimed the old accumulation range. Assuming that we are currently in the distribution phase, from this point onwards, we want to observe a strong continuation of the price.”
MN Trading warned that “A distribution phase is typically of short duration but highly explosive. This is because traders who didn't take a long entry during the manipulation phase now experience FOMO (Fear of Missing Out) and want to enter at higher levels, accelerating the price.”
The analysts identified $31,400 as the range high of the accumulation range, which “often serves as resistance,” and said $32,400 is a “significant liquidity level on the daily timeframe.”
While some see positive gains for BTC in the near future, market analyst Rekt Capital posted the following tweet warning about the potential formation of a double top on the Bitcoin chart, which could lead to further downside unless the Relative Strength Index (RSI) is able to break out of its current downtrend.
A #BTC Weekly Close below ~$29250 could activate this brewing Double Top
— Rekt Capital (@rektcapital) August 9, 2023
The Weekly Bearish Divergence also adds confluence
The $BTC Weekly Close above ~$29250 as well as an RSI break of the downtrend are crucial to regaining bullish momentum#Crypto #Bitcoin pic.twitter.com/SbthOVIHPH
Altcoins in the red
The majority of altcoins in the top 200 recorded losses on Wednesday, with the only gain of note coming from Aptos (APT), which climbed 10.55% to trade at $7.45 after Microsoft announced a new partnership with Aptos Labs intended to help facilitate the adoption of web3 through the creation of the ‘Aptos Assistant’ AI chatbot.
Daily cryptocurrency market performance. Source: Coin360
Golem (GLM) was the biggest loser on the day with a decline of 23.69%, followed by a loss of 9.24% for Optimism (OP) and an 8.4% decline for Mantle (MNT).
The overall cryptocurrency market cap now stands at $1.18 trillion, and Bitcoin’s dominance rate is 48.7%.
