Bitcoin hits $45,000 ahead of the July US inflation report, but data suggests an imminent correction

Bitcoin ( BTC ) reached its highest level in more than two months, with the July inflation report just days away.

The higher cryptocurrency rose 1.65% to $45,363 on Aug. 8, continuing the bullish momentum that has already seen it jump 21.62% from its Aug. 5 low of $37,300.

BTC / USD daily chart. Source: TradingView.com

Momentum was also strong among Bitcoin’s rivals. Ether ( ETH ), the second-largest cryptocurrency by market value, has risen 29.78% since its August 3 low of $2,630, exceeding $3,100 on Sunday.

His gains came after Ethereum’s hard fork called London went live on August 5, which should add deflationary pressure to ETH supplies.

July inflation report online

On Wednesday, August 11, the US Bureau of Labor Statistics will release the July inflation report, with the markets predicting a 0.5% increase . The projections come after the consumer price index (CPI) jumped to 5.4% year-on-year in June, posting its biggest increase in 13 years.

The Bitcoin Bulls responded positively to recent inflation reports. They effectively protected the cryptocurrency from dropping below $30,000 after the May 19 crash.

Meanwhile, its recent efforts to push prices above $40,000, eventually leading to a slow break higher above $45,000, indicate strong demand for Bitcoin, which appears to be coming out of its summer slump.

Lex Moskovski, chief investment officer at Moskovski Capital, highlighted a Glassnode chart that showed dramatic spikes in entities entering the Bitcoin network, combining growth with rising BTC/USD rates.

Bitcoin entities net growth chart. Source: Glassnode

“The amount of new Bitcoin entities continues to peak.” tweeted Moskovsky .

In addition, network analyst Willy Woo said Bitcoin’s continued push should push its prices to more than $50,000, citing the imbalance between supply and demand in the market. He said that all investor cohorts were buying Bitcoin , which led to an offer shock.

Related: Here’s what traders expect now that the price of Ethereum is above $3,000

Woo referred to a chart he posted on July 15, when the Bitcoin market was correcting down after hitting a session peak of $36,675. The chart, as shown below, highlighted Bitcoin liquidity shock events across all exchanges and their relationship to prices.

Woo explained:

“The fundamentals do not predict the short-term price, but with enough time, the price discovery reverts to the fundamentals. [O] Exact value is $53.2K today, with a standard deviation band between $39.6K – $66.8K (68.5% confidence).”

low fractal

However, Bitcoin’s latest climb carries risks of becoming a dead cat bounce based on previous top-down Fibonacci retracement fractals.

Bitcoin Fib retraction from local tops to 200 weeks EMA. Source: TradingView.com

After hitting record highs, Bitcoin tends to correct itself toward its 200-week exponential moving average (200-week EMA; the yellow wave), where it eventually bottoms out to seek another bullish cycle.

In the last two events, the BTC/USD exchange rate showed false recovery rallies after testing the 23.6 Fib line as support. Those bullish moves failed before turning into big bullish moments after facing resistance at higher Fib levels.

Related: 3 reasons why Ethereum is unlikely to release Bitcoin anytime soon

For example, in 2019, Bitcoin rebounded by more than 50% after jumping from its 23.6 Fib line to close to $7,357. But the cryptocurrency faced extreme selling pressure near its 61.8 Fib line of $10,613. Eventually it resumed its downtrend and dropped as low as $3,858 in March 2020.

If the fractal repeats, Bitcoin could face extreme resistance at the 61.8 Fib level at $46,792 and correct the low to retest its 200-day EMA, which is currently below $20,000.

Independent market commentator and trader Keith Wareing has suggested that an impending bullish cross between Bitcoin’s two weekly moving averages suggests the start of a multi-month bullish run. Called MACD, the indicator was instrumental in predicting the 2020 bull run.

Bitcoin prices and MACD crossovers in recent history. Source: TradingView.com

“The weekly MACD is expected to rise in Bitcoin after the close tonight,” opined Wareing to his followers, with Bitcoin price so far holding above $44,500 at time of writing.

The views and opinions expressed herein are those of the author alone and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you must conduct your own research when making a decision.

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