Bitcoin Faces Resistance Despite Positive U.S. Inflation Report

Thursday marked a significant day for the crypto markets as bitcoin (BTC) struggled to break through a key resistance level amidst a favorable U.S. inflation report, continuing the downward trend observed since early June. Despite a positive response to the U.S. reporting a decrease in consumer prices for the first time in four years, which led to increased Fed rate cut speculations and boosted higher-risk assets like BTC, the cryptocurrency failed to sustain gains.

Initial optimism emerged as bitcoin approached a crucial descending trendline, reflecting the decline from the June highs near $72,000. A successful breach of this trendline would have signaled a potential end to the pullback and attracted momentum traders. However, hopes were dashed as prices retreated from the resistance level, dropping below $57,000 early the next day.

The recent failure of the bulls, amid positive macroeconomic developments, suggests a possible further decline in prices. A similar rejection at the trendline on July 1 exacerbated the sell-off. Nevertheless, there are indicators offering hope for the bulls. The MACD histogram on the daily chart is hinting at a potential crossover above zero, signaling a forthcoming bullish momentum shift.

Furthermore, the selling pressure originating from Germany’s Saxony state, which triggered a price drop earlier this month, is nearing depletion. Additionally, uncertainties surround the potential liquidation of the 95,000 BTC, part of the 140,000 BTC set to be distributed to Mt. Gox’s creditors.

According to crypto prime broker FalconX, factors like the expected repayment of $16.3 billion by FTX in the upcoming months, the growing positive sentiment towards cryptocurrencies from various quarters, and the possibility of a general interest rate cut in September favoring risk assets, could embolden medium- and long-term bulls in the market.

FalconX also noted that the selling behavior of Mt. Gox’s creditors might differ from Saxony’s sales, suggesting that the distribution of funds might vary in terms of destinations such as exchanges or professional liquidity providers, potentially leading to a more gradual selling process over time.