Bitcoin Price Dips Below Consolidation Floor Amid Macroeconomic Stability
Bitcoin (BTC) has broken below its lower consolidation limit of $116,000, ending a 16-day consolidation phase this week. The price of BTC has decreased by 3.4% this week, with the breakout occurring despite a stable macroeconomic backdrop. The U.S. Federal Reserve (Fed) held interest rates steady, signaling risk aversion. Market participants are also digesting positive developments for the digital asset space, such as the White House’s release of its cryptocurrency policy report.
Traders are now weighing whether this is a temporary dip or the start of a deeper correction.
Fed Holds Interest Rates Steady
Bitcoin’s price consolidation ended on Thursday, falling below its lower limit of $116,000. The 16-day consolidation phase ended a day after the Fed’s interest rate decision on Wednesday.
The Fed held interest rates steady in the 4.25%-4.50% range for the fifth consecutive time, despite pressure from U.S. President Donald Trump and his allies to reduce borrowing costs.
Fed Chair Jerome Powell stated during the post-meeting press conference that the central bank had not made decisions about cutting rates in September, highlighting a hawkish stance, which isn’t favorable for riskier assets like Bitcoin. The odds of a September rate cut fell from nearly 60% before the meeting to approximately 43% after the press conference, according to the CME Fedwatch tool.
However, the decision faced opposition from Fed governors Michelle Bowman and Christopher Waller. This was the first time since 1993 that two governors dissented on a rate decision.
Traders are now awaiting the July Non-Farm Payrolls (NFP) data this Friday for further direction for Bitcoin.
Trump’s Tariff Deals Generate Uncertainty in Cryptocurrency Markets
Trade war headlines have been mixed recently. The week began with optimism following the announcement of an agreement between the U.S. and the European Union (EU), which followed a similar announcement between the U.S. and Japan. The White House also reported ongoing talks with China.
However, as the August 1st deadline approached, agreements with other major trading partners like Canada, Australia, and India were uncertain. Additionally, Trump announced a 50% tariff on Brazilian imports and a universal 50% tariff on imports of semi-finished copper products and copper-intensive derivative products, effective August 1st.
The Kobeissi Letter reported that Trump is imposing a large number of new reciprocal tariffs, including 39% on Switzerland, 30% on South Africa, and many Southeast Asian countries. These tariffs will take effect on Friday at midnight. Meanwhile, S&P 500 futures are down just 10 points, almost entirely due to weak earnings results from Amazon.
“In April, this headline would have caused the S&P 500 to drop by -3%. The trade war has lost its shock effect on the markets,” Kobeissi reported.
White House Releases First Virtual Asset Policy
The White House released its first virtual asset policy on Wednesday, as required by Executive Order (EO) 14178. The report, spanning over 160 pages, contains recommendations related to cryptocurrency policy and pushes for regulatory clarity in the U.S.
The report had a moderate impact on Bitcoin’s price, as BTC stabilized around $111,700 that day. Market participants likely disregarded the text, as the key issue of the Strategic Bitcoin Reserve was not clearly addressed.
Key areas of interest include recommendations for the U.S. SEC to establish clear guidelines for the development of tokenized stocks and treasuries. It also urges regulators to clarify “permissible banking activities” related to stablecoins and the use of blockchains, promote transparency on how institutions can obtain banking licenses, and ensure that bank capital rules better reflect the particular risks of digital assets.
JPMorgan and Coinbase Partner to Link Bank Accounts to Cryptocurrency Wallets
Bloomberg reported on Thursday that JPMorgan Chase & Co. and Coinbase Global Inc. have signed an agreement to link customers’ bank accounts to their cryptocurrency wallets directly.
“Connections between Chase bank accounts and Coinbase cryptocurrency wallets are expected to go live next year,” Bloomberg reported.
The partnership indicates a long-term bullish impact on the cryptocurrency market, including Bitcoin, as it enhances broader adoption and growing cooperation between traditional banks and cryptocurrency platforms.
U.S. SEC Greenlights In-Kind Creations and Redemptions for Bitcoin and Ethereum ETPs
The U.S. SEC announced in its press release on Tuesday that it has voted to approve orders to allow in-kind creations and redemptions by authorized participants for shares of cryptocurrency ETPs.
This order is a shift from the previous cash-only mechanism used for spot BTC and ETH ETPs, which were limited to cash creations and redemptions. This development marks a regulatory shift from the previous cash-only mechanism used for spot Bitcoin and Ethereum ETPs, now aligning cryptocurrency products with traditional commodity-based ETPs like Gold and Oil.
What’s in Store for Bitcoin in August?
Bitcoin reached a new all-time high of $123,218 on July 14th, achieving an 8.13% return for the month. Historically, BTC has generally generated a positive return for traders in August, with an average gain of 1.60%. If regulatory clarity and ETF demand continue to strengthen, and tariffs and geopolitical uncertainty decrease, traders could see positive returns in August.
Historical Monthly Bitcoin Returns.
Feint or Confirmation?
Bitcoin’s price finally broke below its lower consolidation level at $116,000 on Thursday, ending a 16-day consolidation phase and signaling a potential shift in market momentum. As of Friday, it sits around $115,600.
If BTC continues its pullback, it could extend the drop to retest the 50-day exponential moving average (EMA) at $112,951.
The Relative Strength Index (RSI) on the daily chart is falling below its neutral level of 50 and pointing downward, indicating that bearish momentum is gaining traction. The Moving Average Convergence/Divergence (MACD) showed a bearish crossover on July 23rd, giving a sell signal. It also shows increasing red histogram bars below its neutral line, suggesting further bearish momentum and a downtrend.
However, if BTC recovers, it could advance towards its upper limit of the consolidation range at $120,000.
Bitcoin, altcoins and stablecoins – Frequently Asked Questions
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any person, group, or entity, eliminating the need for third-party involvement during financial transactions.
Altcoins are any cryptocurrencies other than Bitcoin, but some also consider Ethereum not to be an altcoin because it is from these two cryptocurrencies that the fork occurs. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any stablecoin is linked to a commodity or financial instrument, such as the US Dollar (USD), and its supply is regulated by an algorithm or demand. The main objective of stablecoins is to provide an entry and exit ramp for investors who wish to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value, as cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio between the market capitalization of Bitcoin and the total market capitalization of all cryptocurrencies combined. It provides a clear picture of the interest that Bitcoin arouses among investors. A high BTC dominance usually occurs before and during a bullish movement, in which investors turn to investing in relatively stable and high market capitalization cryptocurrencies such as Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in search of higher returns, which usually triggers an explosion of rises in altcoins.
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