(Kitco News) – Stocks were the biggest beneficiaries of improved sentiment regarding interest rates and inflation as Friday saw the major indices rally higher, while Bitcoin (BTC) saw only modest gains and gold recorded a slight decline.
The June Producer Price Index (PPI) report showed that inflation rose more than expected; however, traders brushed that report aside and focused instead on Thursday’s Consumer Price Index (CPI) report, which came in cooler than expected.
Despite the mixed signals on inflation, Wall Street saw an increased likelihood that the Federal Reserve will lower interest rates in September. The CME FedWatch Tool now puts the chances of such a cut at 94%, up from 92% on Thursday.
“The equity market saw gains on Friday following a challenging session for the S&P 500, its worst since April, caused by a shift away from megacap technology stocks,” said analysts at Secure Digital Markets. “Investors focused on the commencement of the second-quarter earnings season, particularly with banks. Despite a slightly higher-than-expected wholesale inflation reading this morning, Wall Street largely dismissed these figures. The prior day's decline in the consumer price index fueled optimism for a Federal Reserve rate cut in September.”
At the closing bell, the S&P, Dow, and Nasdaq all finished higher, up 0.55%, 0.62%, and 0.63%, respectively.
While stocks saw gains, the ‘store-of-wealth’ assets struggled to gain momentum, with gold down 0.23% and trading at $2,416.30 at the time of writing.
“Earlier today, Bitcoin was trading around $56,500, reflecting a pullback from the critical $60,000 resistance level that has been a focal point for some time,” said analysts at Secure Digital Markets. “BTC experienced a rise above $59,000 on Thursday, driven by the U.S. reporting its first decrease in consumer prices in four years—a development that signals potential interest-rate cuts by the Federal Reserve.”
“However, Bitcoin's inability to sustain a rally despite favorable macroeconomic news indicates potential further price weakness,” they warned. “Yet, the downside may be constrained as the recent supply from Germany's Saxony state has depleted.”
BREAKING: The German Government is now out of Bitcoin.
The German Government just sent 3846.05 BTC ($223.81M) to Flow Traders and 139Po (likely institutional deposit/OTC service).
The German Government has 0 BTC ($0.00M) remaining. pic.twitter.com/R2vfylR1b2— Arkham (@ArkhamIntel) July 12, 2024
The German government has liquidated 50,000 Bitcoins over the last few weeks, which has been widely cited as the reason BTC has struggled to climb higher. “A breakout above $60,500 could initiate a rally toward $64,000, with an extension to $67,000,” the analysts concluded.
Data provided by TradingView shows that Bitcoin rallied to a high of $58,545 in the afternoon following the PPI release, but has since pulled back to support near $57,500.
BTC/USD Chart by TradingView
At the time of writing BTC trades at $57,615, an increase of 0.10% on the 24-hour chart.
A bullish Q4
With the threat of heavy selling by the government of Germany now in the rearview mirror, crypto proponents are starting to express more bullish sentiments, though most acknowledge that Bitcoin could trade sideways until the fourth quarter of 2024.
According to Jan van Eck, CEO of asset manager VanEck, Bitcoin’s double-digit correction has historical precedent in prior bull market cycles and shouldn’t be seen as a negative development.
During an interview with CNBC on Thursday, van Eck specifically pointed to the German government's Bitcoin sales as the source of the recent weakness but said the strong performance of spot Bitcoin exchange-traded funds (ETFs) plus the likelihood of the Fed cutting rates before the year’s end are reasons to remain bullish.
“It’s like fuel for Bitcoin and gold investors, the Fed easing, so it’s super bullish,” he said. “Bitcoin got some selling from the German government, there was the Mt. Gox selling – short-term stuff. But we’ve seen only a 20% correction in the Bitcoin price, and that’s kind of normal in a bull market.”
“At VanEck, we like to say we’re hodling, which is holding on for dear life,” he added. “So we’re long-term investors, and all the [spot BTC] ETFs pretty much have seen inflows, including last month, when the price was down 10%. So it’s a drip from retail investors.”
According to CryptoQuant analyst caueconomy, institutional investors have jumped at the chance to pick up low-priced Bitcoin during the sell-off at the expense of retail investors.
“While many novice investors capitulated last week, with special emphasis on coins purchased between 1 and 3 months ago, institutional players made the largest accumulation process since March,” caueconomy wrote.
“The first months of the launch of Bitcoin ETFs were marked by an intense process of institutional accumulation,” he added. “However, a large part of this accumulation was the funds issuing the ETFs themselves. On the other hand, last week, an accumulation process of approximately 101.6 thousand BTC was recorded, but with a special detail: low volume of fundraising in ETFs and falling prices.”
“This means that, unlike what was seen in March, which was a demand more linked to fundraising, the current institutional accumulation may indicate a true process of ‘buying the dip’ in large players,” he concluded.
TradingView analyst TradingShot looked at the performance of previous cycles to provide a macro view of the Bitcoin market, noting that the angle of gain in every cycle so far “has been approximately 10 degrees (°) less than the previous one from top to bottom.”
The 1st Cycle (2012 - 2013) was 54°, the 2nd (2015 - 2017) was 42° and the 3rd (2019 - 2021) was 30°,” he noted. “Based on this progressive sequence, we can expect the current one to top at around 20° from the bottom.”
“Even though the price is on a declining angle rate, the 1W RSI is remarkably stable,” TradingShot observed. “As you can see, every Bull Cycle is around 25°, so there is no reason to expect the current one to diverge from this. This way when the RSI tops, we will know when to sell and sit back with the profits until the next Bear Cycle bottom.”
He concluded by noting that, “according to the Bull Cycle phases classification, Bitcoin is still within its Accumulation Phase (blue Rectangle), so we haven't yet seen its most aggressive part, the Take-off Phase (orange).”
Altcoins finish the week mixed
The altcoin market finished the week mixed, with the top 200 tokens evenly split between winners and losers.
Daily cryptocurrency market performance. Source: Coin360
SATS (1000SATS) led the field with a gain of 15.2%, followed by a 9% increase for Ordi (ORDI) and an 8.1% gain for BinaryX (BNX). Meme coins led the losers as cat in a dogs world (MEW) fell 7.2%, Bonk (BONK) lost 6%, and Mog Coin (MOG) declined by 5%.
The overall cryptocurrency market cap now stands at $2.12 trillion, and Bitcoin’s dominance rate is 53.3%.
