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Is the Bitcoin price ready for a new correction?

The correction of the Bitcoin price at the end of July is now over. However, there are hypotheses suggesting the possibility of triggering another one.  For now, they are only hypotheses without concrete confirmations, but such a scenario indeed seems at least plausible.  The trend of the Bitcoin price After reaching new all-time highs in …

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The correction of the Bitcoin price at the end of July is now over. However, there are hypotheses suggesting the possibility of triggering another one. 

For now, they are only hypotheses without concrete confirmations, but such a scenario indeed seems at least plausible. 

The trend of the Bitcoin price

After reaching new all-time highs in July, surpassing $120,000 for the first time in its history, the price of Bitcoin (BTC) had apparently consolidated around $118,000.

That level, however, ultimately did not hold, due to the end-of-July correction that brought it back below $115,000.

It must be said that these are still quite high figures, especially when compared to the modest $70,000 prior to the Trump-trade of November, but it is not certain that they will hold. 

By now, since January 2023, there has been an almost continuous growth, although not linear and alternating with periods of strong correction. 

This growth has occurred mainly in four phases, of which the last one is still ongoing and, to tell the truth, there are still no signs of stopping. 

Note that the highs of the previous bull run stopped just below $70,000, which is the same level where the price of Bitcoin was before Trump’s electoral victory.

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BTCUSDT quotes by TradingView

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The hypothesis of the new correction

The problem comes from afar.

At this moment, in fact, on the Bitcoin market, no signs of difficulty are visible. On the contrary, the selling pressure, although it has slightly increased in recent days, remains close to the minimum levels of this cycle, reached in mid-July. 

It is therefore not a difficulty specifically related to the trend of Bitcoin’s price, or the crypto markets, also because in reality Bitcoin is showing a lot of strength.

Instead, the traditional stock exchanges, especially the USA ones, have shown some signs of possible difficulty. For now, these are still just signals, but the hypothesis circulating is that there could be a significant correction, although perhaps not enough to bring them into bear-market. 

In the event that a similar scenario materializes, it is very likely that the correction will end up affecting the crypto market as well, and therefore also the price of Bitcoin. 

The role of the dollar

To all this must be added the fact that the US dollar still seems relatively strong. 

In reality, compared to the beginning of the year, the Dollar Index (DXY) has fallen significantly and is still very low, as it is now around 99 points while in January it was at 110. However, over the course of the last month, it has risen from less than 97 points to more than 100, and then perhaps settled around 99 points.

In the short term, this is not having an impact on the price of BTC, but it should be remembered that in the medium term, the trend of Bitcoin’s price tends to be inversely correlated to that of the Dollar Index. 

The point is that the downward trend of the dollar that started at the end of January might have also come to a halt at the end of July, and if that were the case, the scenario of a further correction in the price of Bitcoin would be favored. 

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There are therefore two external factors that are pushing for an additional correction of BTC to be triggered, even if for now these pushes are proving ineffective. 

“`html

The Fed

“`

The slight decline of the Dollar Index in recent days, although very limited, is due to the change in market opinion regarding the Fed’s monetary policy. 

At the end of July, the Fed not only did not cut interest rates, but also indicated that the situation did not seem to suggest a possibility of a cut in September (in August, the Fed committee that makes decisions on rates will not meet).

On the first of August, however, updated data regarding the US labor market was released, outlining a picture that is clearly worsening, although still positive in reality. 

In light of those data, the markets have started to consider a rate cut in September very likely. 

In fact, the yield of American government bonds has slightly decreased, and this has also caused the Dollar Index to decrease, whose trend tends to be correlated with that of Treasury yields. 

However, by now the market is already pricing in a minimal rate cut in September, therefore it is extremely difficult for the Fed’s monetary policy to influence the price trend of Bitcoin in the medium-short term. 

It therefore remains possible the scenario mentioned above, that regardless of what the Fed will do in September, in the coming days or weeks the price of Bitcoin could also correct again. 

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