Bitcoin (BTC) is currently trading at $21,800, with a 1% loss in the last 24 hours and a 6% decline in the previous seven days. It seems that the price is retesting the resistance levels around $22,000.
Can Bitcoin Break Above $22,000?
At the moment, all eyes are focused on Jerome Powell, chairman of the U.S. Federal Reserve, and his address at Jackson Hole. The assumption that Powell could come out as dovish, less forceful in his desire to drive down inflation, or happy with the recent inflation data has led some market participants to take long bets.
For bulls to have a strong chance of reversing momentum, Bitcoin must break above crucial resistance near $22,000. The figures confirmed that U.S. inflation had already peaked, which the Consumer Price Index was already supporting, and analysts responded favorably to this (CPI).
Despite the uptick, the hourly chart of Bitcoin remained intact. According to Caleb Franzen, a senior analyst at Cubic Analytics, the price action remained in a range. Bitcoin had dropped from its highs on August 19.
Kevin Svenson, an analyst, maintained his conservative outlook on Bitcoin. He noted that the data released by the Fed is bullish, which is why investors are betting on a rise in inflation. However, if Powell continues to maintain his policy stance, Bitcoin could easily fall back.
BTC Active Participants Drop
Caue Olivera, an analyst at Block Trends, discussed the long-term trends of the cryptocurrency market. He noted that although the price action has started to show signs of a return to form, the overall trend is still not favorable.
He noted that although the network usage has started to recover, the overall trend is still not favorable. He also stated that there is little room for a potential bull run due to the lack of strong volume.
In addition, Bitcoin’s new bull market has already ended, noting that the price of the cryptocurrency is still far from reaching its potential. He also noted that the lack of strong demand for the network is not helping the market’s recovery.
On-chain analytics firm Glassnode released a chart showing the median on-chain transaction volume during the past two years. It included the recent price run-up. According to Olivera, the low reserve levels of major exchanges are due to the lack of speculative activity. He also noted that the lack of trading interest had affected the volume of transactions.
Despite the lack of active participants, he noted that the long-term outlook for the cryptocurrency is still positive. However, for short-term investors, caution is needed.
Bulls Might Need to Watch out for the ‘September effect’
Despite the recovery from the $17,500 June lows, Bitcoin bulls should not get too excited about the near-term potential of the cryptocurrency. BTC is set to enter its riskiest month.
According to historical data, September is considered Bitcoin’s worst month since it began in 2013. However, the average decline in the price during that month is only -6%.
Bitcoin’s poor performance in September has been linked to the stock market’s decline. For instance, the S&P 500 index has lost 0.7% in September on average during the last 25 years. Traditional chart analysts call this annual drop-off the ‘September effect.’
According to analysts, investors usually exit their positions in September to lock in gains or minimize their tax liability before the year ends. They also noted that investors tend to sell their assets in September to raise funds for their children’s school expenses.
The positive correlation between the stock market and Bitcoin has been largely intact since the outbreak of the coronavirus pandemic. This could also increase the likelihood of Bitcoin dropping significantly in September.