Cardano dropped 57% when the Federal Reserve cut rates back in 2019. With another rate cut on the horizon, the cryptocurrency faces a similar setup that could bring major downside.
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Cardano prepares for September decline
In May 2019, the Federal Reserve initiated its first rate cut, lowering rates from 2.42% to 2.39%. Rates at that time were much lower than today, and the public debt stood at $22 trillion. Today, debt has increased to nearly $35 trillion, and interest rates now stand at 5.33%, more than double the 2019 levels.
Federal Reserve Economic Data (FRED)
When the rates started to fall in 2019, Cardano experienced a sudden drop. After a brief period of recovery, the downtrend continued for months until early 2020. An uptrend emerged later, but the market downturn during the COVID-19 pandemic coincided with further rate cuts. Despite uncertainties around the exact link between rate cuts and crypto declines, Cardano and the broader market saw a clear decrease in value.
A similar scenario could unfold today. Crypto has shown correlations with traditional finance in the past, including during the 2019 rate cut. The Federal Reserve’s upcoming meeting is likely to result in a rate cut based on CME data. If the market follows the 2019 pattern, Cardano could face a multi-month decline, which could last until the end of the year, before recovering in early 2025. A repeat of the previous trend could push Cardano’s price down to around $0.15.
Additionally, September has often proven to be a tough month for both stocks and crypto. In September 2020, during a halving year, Cardano also faced a downtrend. Coupled with the current 10% drop since the start of this month, these factors could drive Cardano toward a deeper fall in the weeks and months ahead below its 2022 support line at $0.2349.
Cardano’s bearish momentum grows with SRSI, MACD, and VRVP
Many traders focus on short-term movements, but stepping back for a longer-term view can give a better sense of the bigger picture. Cardano’s monthly Stochastic RSI (SRSI) and MACD are flashing warning signs that shouldn’t be ignored, and both are painting a rough picture for ADA.
The SRSI tracks momentum by looking at an asset’s price range over time. The scale goes from 0 to 100, with anything below 20 showing oversold conditions. Since March 2024, the SRSI has been sliding, and it’s now closing in on that oversold region.
The MACD, meanwhile, is showing similar bearish vibes. On the monthly chart, the MACD line has already crossed below the signal line, which is a sign of downward pressure. The histogram, which shows the gap between the two lines, is about to flip red, also pointing to a growing bearish momentum.
Alongside the bearish signals from the Stochastic RSI and MACD, the Visible Range Volume Profile (VRVP) adds even more negative pressure to the outlook. The VRVP shows where most trading volumes occurred at various price levels. In Cardano’s case, the volume bars within the current price range are quite thin, which indicates weak support. The biggest volume bar begins at the $0.15 level, suggesting a strong support zone there. Below the current price, there’s a gap in the volume profile, which means if Cardano continues to fall, there’s little trading activity to slow down the drop until it reaches that $0.15 zone.
Is Cardano’s 2022 support line strong enough to hold?
Despite the bearish indicators, a couple of factors could prevent Cardano from dropping sharply. At the moment, the price sits within a macro Fibonacci golden pocket, drawn from the all-time low to the recent high in March 2024. This zone, between $0.2951 and $0.3204, has acted as support for now. However, when looking at other Fibonacci retracements from different points, ADA has already fallen below the 78.6% retracement on every one of them. This could raise doubts about the strength of the current golden pocket, as there’s a possibility it may not hold up in the long term.
A stronger support level, however, lies at $0.2349, a line that was respected during the 2022 bear market. But, with ADA currently around $0.315, a drop to that support would still represent a 25% decline, which would be far from ideal.
Strategic considerations
In our view, there could be a dead cat bounce before the September 18 Fed meeting. However, after that, ADA is likely to face a 2-3 month downtrend until the Fed slows the pace of its rate cuts. A more cautious strategy would be to wait for ADA to drop below the $0.2951 golden pocket before shorting. This offers a safer entry point compared to shorting immediately right now, as Cardano could see a short-term uptrend while holding above the golden pocket. If the price falls below this level, shorting down to $0.2349 becomes a more calculated move.
In just 10 days, POPCAT has dropped over 30%, but the decline may not be over. A deeper analysis of multiple indicators reveals that further declines could be on the horizon.
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Inside POPCAT’s parallel channel
POPCAT respects a parallel channel that defines its movement. While there have been moments when the price broke above or below the channel, it continues to adhere to this pattern over time. The white lines on the chart offer a simplified representation of the price movements within the channel.
Looking ahead, the yellow lines depict a possible future path for POPCAT. The next move could see a drop to around $0.43 in the coming weeks, representing a further decline of over 23% from the current level. After this, the price may then rally towards $0.87 around October to November.
Gartley harmonic pattern on the verge of completion
One strong indication that supports the likelihood of a further downturn in POPCAT is the development of the Gartley harmonic pattern on its daily chart. The Gartley pattern is a type of harmonic price formation that signals potential reversal zones based on Fibonacci ratios and has an 85% success rate. It consists of five points—X, A, B, C, and D—and represents a retracement followed by a continuation of the overall trend.
In the case of POPCAT, the pattern has formed with the final point D yet to be completed. If the Gartley pattern completes as expected, the price could drop to approximately $0.38. This target lies slightly below the lower boundary of the established parallel channel.
MACD Reversal
Another factor pointing toward a potential continued decline in POPCAT is the recent bearish crossover in the Moving Average Convergence Divergence (MACD) indicator. The MACD is a momentum indicator that consists of two lines: the MACD line and the signal line. It shows the strength and direction of a trend by analyzing the relationship between these two lines.
A crossover occurs when the MACD line crosses below the signal line, which is seen as a bearish signal, similar to a “death cross” in moving averages. The crossover means that the momentum has shifted from bullish to bearish.
Counterpoints: Limited downturn possibility
While several factors suggest a continued downturn for POPCAT, there are also indicators that could limit or even conclude the current decline.
First, there is a confluence of multiple Fibonacci golden pockets in the $0.53 to $0.593 range. These include the Fibonacci retracement from the low on August 19 to the high on August 25, the high on July 1 to the low on August 5, and the low on July 5 to the high on July 21. Additionally, the 50% retracement levels from other Fibonaccis also converge within this price zone, which strengthens the support in this area. Until POPCAT drops below $0.53, the downward movement will likely not continue. On the other hand, if it fails to break above $0.593, we also cannot confirm that the decline has ended.
Adding to this, the historical volatility range for POPCAT between $0.50 and $0.55 has been quite an important zone, acting as support or resistance on 38 different occasions. The area closely aligns with the golden pocket confluence, which further reinforces the significance of this zone as a potential floor for the current downtrend.
Lastly, the Visible Range Volume Profile (VRVP) adds another layer of support in the $0.55 to $0.593 area. The VRVP is a tool that displays trading activity at various price levels and highlights areas with high trading volumes as major zones of support or resistance. In this case, the volume bar in the $0.55 to $0.593 range is the biggest and suggests strong buyer interest. However, if POPCAT drops below $0.40, the volume profile thins out considerably, indicating little to no support below that level, which could lead to even steeper declines if breached.
Strategic considerations
At the current price level, POPCAT presents a conundrum. On the one hand, several indicators suggest further downturns, while on the other, key support levels hint that the bearish phase may have already run its course, with bullish momentum potentially on the horizon.
In our analysis, which aligns with insights shared in previous articles, the upcoming monetary policy shift—specifically the anticipated rate cuts in September—combined with the historically weak performance of cryptocurrencies in September could render these support zones for POPCAT obsolete. Given this outlook, the strategic approach would involve shorting POPCAT down to the $0.43 level.
Toncoin experienced a sharp 27% drop to $5.04 in the wake of Pavel Durov’s arrest. Although the price has since stabilized slightly above that level, the situation remains precarious due to the ongoing investigation surrounding the Russian Zuckerberg. Despite the temporary stabilization, the indicators present a bleak outlook for Toncoin, suggesting potential downturns regardless of the investigation’s outcome. The analysis below outlines the factors contributing to this grim forecast.
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Toncoin slips below 50 and 200 MAs
Toncoin’s price fell beneath both the 50-day and 200-day moving averages (MAs) on the daily chart. The 50-day MA reflects short- to mid-term market sentiment, while the 200-day MA captures the long-term trend. A position below both indicates a sustained loss of momentum, which makes it difficult for TON to regain upward traction quickly.
Moreover, Toncoin now faces the prospect of a death cross, where the 50-day MA may cross below the 200-day MA. This is a strong bearish signal and often leads to major declines.
Bollinger Bands signal weakness for Toncoin
On the weekly timeframe, TON currently trades below the middle line of the Bollinger Bands and sits near the lower band. When a price is below the middle band, it suggests that the asset is underperforming relative to its recent average. And trading near the lower band indicates that the price is approaching the lower end of its expected range, signaling potentially oversold conditions.
Stochastic RSI shows no relief for Toncoin
The Stochastic RSI on Toncoin’s weekly chart now sits in the oversold region, below the 20 level. In other words, the selling pressure has dominated to the point of exhaustion. Although a recent bullish crossover occurred, indicating a possible reversal, in reality, the signal proved misleading. Now, a bearish crossover has taken place, thus the downward momentum is gaining strength rather than subsiding. The implications are clear: Toncoin continues to face strong selling pressure, with little indication of a near-term recovery.
Toncoin’s MACD shows growing downward pressure
The MACD on Toncoin’s weekly chart has also confirmed a bearish signal. A bearish crossover occurred when the MACD line crossed below the signal line. The distance between the two lines has continued to widen (reflected by the expanding histogram), which indicates that the downward momentum is not just persisting but intensifying.
Toncoin’s recovery unlikely as DMI stays bearish
The Directional Movement Index (DMI) on Toncoin’s weekly chart also shows a clear bearish trend. The -DI (orange line) represents the strength of the downward movement and currently stays above the +DI (blue line), which signals stronger bearish momentum. The ADX (yellow line), which measures the overall strength of the trend, continues to decline, indicating of a loss of bullish momentum. The downward pressure remains firm, suggesting that Toncoin’s recovery may not materialize soon.
Closing thoughts
In addition to the technical indicators pointing to downward pressure for Toncoin, it’s crucial to consider the broader macroeconomic outlook. Although relying solely on historical performance can be misleading, patterns and external factors still provide valuable context.
Historically, September has been a challenging month for the crypto market. Since 2013, it has ended positively only three times, while the rest have recorded losses. On average, the market has experienced a 4.51% decline in September.
Source: CoinGlass
A more major concern lies in the monetary policy landscape of the United States. Looking ahead to the Federal Reserve’s September 18th meeting, the probabilities for a rate cut are non-existent, and the chances of a rate hike remain high. Federal Reserve Chair Jerome Powell’s recent statement, “The time has come for policy to adjust,” shows a likely shift in monetary policy. Historically, cryptocurrencies tend to react negatively during periods of rate cuts until the cuts stop and policy stabilizes. Given this, the broader crypto market, including Toncoin, may face further declines in the coming months before potentially transitioning into a bullish trend towards the end of 2024 and into 2025.
Source: CME
While historical performance does not guarantee future outcomes, these factors are essential considerations for any investor. At present, the uncertain market conditions make investments in Toncoin, Bitcoin, Ethereum, Solana, and any other cryptocurrencies particularly risky.
The TON blockchain went down twice within 36 hours due to an unexpected spike in transaction volumes driven by the sudden popularity of a new memecoin called DOGS. The heavy traffic caused by DOGS transactions overwhelmed the network, leading to concerns about the blockchain’s capacity to handle high volumes of activity and its overall stability.
The TON blockchain recently faced two significant outages, both linked to the sudden release and popularity of the DOGS memecoin. The first disruption occurred on 27 August 2024, when block production halted at 23:00 UTC and did not resume until 05:30 UTC on 28 August, leading to a six-hour downtime. The second disruption began on 28 August 2024 at 19:19 UTC, lasting over four hours.
Block production on TON experiencing further disruption
Block production issues began at 19:19 UTC. The disruption appears to be due to heavy load attributed to DOGS token minting. TON Core is working on a solution.
We will continue to update you on the situation as it evolves.…
Both outages were triggered by the overwhelming demand generated by the DOGS token, which led to a massive increase in transaction volume on the network. In just 48 hours, TON processed a staggering 20 million transactions, overwhelming the system to the point of breaking the blockchain. The DOGS memecoin, inspired by Telegram’s mascot Spotty, launched a large airdrop that caused congestion, and the heavy load from the token minting further strained the network during the second disruption.
Several validators were unable to clean the database of old transactions, which means they struggled to remove outdated transaction data effectively. The inability to clean up the database led to a loss of consensus among validators, as they couldn’t process new transactions correctly or maintain synchronized records of the blockchain’s state.
The underlying issue with the Toncoin network, such as many blockchain networks, relates to scalability challenges, particularly with sharding. When a blockchain network uses sharding to scale, it splits the network into smaller parts called “shards.” Each shard handles a portion of the overall transactions, which helps the network process more transactions at once.
However, shards need to communicate with each other to stay in sync. For example, if one shard processes a transaction that affects data in another shard, the two shards must exchange messages to update their records accordingly. The messages ensure that all shards have the correct and up-to-date information.
When there isn’t much activity on the network, the communication works fine. However, during high traffic, when many transactions are happening simultaneously, the number of messages exchanged between shards increases dramatically. Processing all the messages becomes overwhelming for the network, leading to delays, slowdowns, or even failures in keeping the shards synchronized. As a result, the system is unsustainable, as the network can’t handle the volume of communication required to keep everything running smoothly.
The concept of execution isolation offers a more efficient solution to the problem. Instead of constantly communicating between different parts of the network (shards), execution isolation allows each part to handle its own transactions independently. This reduces the need for constant back-and-forth communication, which can slow things down when there’s a lot of activity.
Appchains, also known as application-specific blockchains, take this idea even further. They are specialized blockchains designed for specific tasks or applications. By focusing on just one type of activity, appchains can manage traffic more effectively and avoid the issues that come from trying to do everything at once on a single network. Examples of appchains include Polkadot Parachains, Cosmos Zones, Near Protocol Sharded Chains, Polygon Supernets, and Avalanche Subnets.
In 2024, the Solana blockchain experienced a rapid expansion in the memecoin market, with pump.fun being at the forefront. The platform captured a massive audience seeking quick profits. Crypto.news conducted an in-depth analysis of the profitability of investing in pump.fun tokens, revealing that while a few early adopters managed to secure profits, the majority of investors ultimately lost money.
Pump.fun is the leader in Solana’s memecoin ecosystem and holds 50% of the market share. It achieved this by streamlining token launches and making them both quick and easy. It also focused on ensuring a fair process for creating and trading tokens, avoiding problems like presales or team allocations.
Pump.fun operates as follows:
Users pick a meme coin they like.
They buy the coin through a bonding curve.
They can sell the coin anytime to either secure a profit or cut a loss.
If the token’s market cap hits $69,000, $12,000 of liquidity is locked into Raydium, a decentralized exchange on Solana, and then burned.
Using various queries and scripts inspired by Dune analysts @adam_tehc, @hashed_official, and @evelyn233, we developed our own versions that allowed us to gather data for this article.
Due to the ease of use and the rise in popularity, around 300,000 tokens have been created on Solana each month since March 2024. However, not all of these tokens even reach a market cap of $69,000. Over six months, 33,683 tokens made it to Raydium, while a total of 1,883,578 tokens were deployed on pump.fun. This results in a graduation success rate of only 1.79%.
The statistics for investors on the pump.fun platform paints an even grimmer picture. Out of 29,601,462 total wallets involved, a majority experienced negative outcomes:
17,725,908 wallets (59.9%) recorded negative Profit and Loss (PNL). 89% of those wallets realized losses, locking in their negative returns by selling at a loss.
On the other hand, 11,126,772 wallets (37.6%) reported positive PNL, with 98% of these realizing actual gains.
The distribution of profits further shows the low probability of winning through memecoin investments. To provide a clearer picture of the probabilities associated with different profit levels on pump.fun, here are some realistic comparisons:
+$100 profit (6.47% chance): Less likely than being accepted into Harvard as an early applicant (7.8% in 2021).
+$1,000 profit (0.76% chance): Similar to the probability of having twins, which is around 0.4%.
+$10,000 profit (0.046% chance): Less likely than becoming a NASA astronaut (0.055%).
+$100,000 profit (0.0033% chance): Less likely than being struck by lightning in a lifetime (about 0.00653%).
+$1,000,000 profit (0.000540% chance): Comparable to the chance of being killed by a meteorite impact (approximately 0.0004%).
+$10,000,000 profit (0.000132% chance): Similar to the odds of flipping a coin and getting the same side 20 times in a row.
Many individuals are searching for a quick way to transform their financial situations, inspired by stories of random people making huge profits overnight. Unfortunately, the harsh reality is that most will lose, often catastrophically. Instead of gambling on unproven tokens, investors should focus on assets like BTC, ETH, and SOL — assets with a proven track record. These won’t turn $100 into a million tomorrow, but they will grow an individual’s wealth steadily and sustainably. At the end of the day, investing is for making money and not losing. The sooner one abandons the dream of instant riches and embraces this truth, the sooner they’ll start making decisions that truly increase their net worth. Anything else is a reckless path to financial ruin.
Polygon is on track for a major rally, with potential gains of 145% by year-end. Despite short-term challenges, key support levels and bullish indicators suggest that this could be a strong investment opportunity.
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Support and resistance levels
Polygon (MATIC) is currently trading above an important range, defined by two support levels: $0.33 and $0.50. The $0.33 level has demonstrated strong potential for upward moves in March-April 2021, June 2022, and August 2024. After hitting $0.33 in June 2022, MATIC rallied 311.44% in 140 days.
The second key support level at $0.50 has also influenced MATIC’s price trajectory. For the past two years, the asset has oscillated within a channel bounded by $0.50 on the lower end and $1.29 on the upper end. The $0.50 level served as a strong foundation for upward moves. During the August-October 2022 period, MATIC consolidated around $0.50 before initiating a 161.92% surge over 184 days. Historically, MATIC’s upward moves from these levels have met resistance near $1.29.
In the context of macroeconomic factors, particularly the anticipated September rate cuts and the seasonally weak performance of cryptocurrencies in September, MATIC may exhibit a period of consolidation around the $0.50 area before resuming its upward trajectory toward the $1.29 target by the end of the year. Although market conditions could potentially drive the price back to the $0.33 level, such a retracement would not undermine the fundamental bullish outlook. The zone between $0.33 and $0.50 represents a strategically advantageous entry point. Entering a long position within this range may yield superior returns compared to chasing the price at elevated levels during periods of heightened market activity in the future. Furthermore, other indicators also support the expectation of a continued upward trend.
Stochastic RSI
The Weekly Stochastic RSI signals a favorable entry point when it dips below 20. Although occasional false signals have occurred where the indicator dropped without triggering a substantial move, the area below 20 remains an attractive zone for initiating long positions. The momentum has shifted from bearish to bullish as the Stochastic RSI moved through the 20 level, consolidated, and has now crossed back above it, indicating renewed upward momentum.
50-day Moving Average
Since 2021, in 9 out of 10 instances where the price moved above the 50D MA on a daily timeframe and maintained a position at least 10% higher for three or more days, the market followed with a major upward movement. MATIC has recently mirrored this pattern and remained above the $0.50 level for several days.
Moving Average Convergence/Divergence
Another indicator that signals the potential for continued bullish momentum is the MACD. On the weekly timeframe, the histogram has started to shift positive, with the MACD line nearing a bullish crossover above the signal line. In the last two instances where this setup occurred, MATIC experienced substantial upward moves, which indicates a strong probability of a similar outcome this time.
Bollinger Bands
In three out of four instances where MATIC’s price touched the lower band, major upward moves followed. These occurred in June 2022, June 2023, and now in August 2024, which suggests a possible repeat of the pattern. The only exception was in April 2024, which turned out to be a false signal.
Strategic considerations
MATIC presents a long-term opportunity with strong upside potential, though short-term fluctuations may occur due to macroeconomic factors. A retracement to $0.33 or a consolidation around $0.50 is possible, but the year-end target of $1.29 remains likely.
Traders have three options:
Enter long now: Entering a long position at the current level and holding until year-end could yield around 145%.
Wait for a retracement: Those expecting the September rate cut to trigger a short-term market downturn may choose to wait for MATIC to drop to around $0.33 before entering. This approach could result in a return of about 290% by year-end.
Short MATIC before going long: A more aggressive strategy would involve shorting MATIC down to $0.33 and then switching to a long position. However, successfully executing this strategy requires a high degree of accuracy in predicting a market decline, which is a challenging and speculative endeavor, even more so than the price analysis presented. While this scenario could be profitable, the risk is substantially higher.
Given the uncertainties involved, a safer approach would be to choose either the first or second option. In any case, the likelihood of major losses by year-end is low.
Helium (HNT) has gained 158.15% since the beginning of July, showing a strong upward trend. The key question now is whether HNT will continue its climb or if there will be a pullback on the horizon.
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While Helium’s (HNT) bullish run has been exciting, it may soon turn into a disappointment for investors. The lack of consolidation or pullback during this rally raises concerns that one might be on the horizon. Here’s why a pullback could be imminent.
Moving Average Convergence Divergence
Examining the daily Moving Average Convergence Divergence (MACD), we notice the histogram shifting from dark green to light green, indicating a weakening bullish momentum. The MACD lines are also beginning to converge, suggesting that the current uptrend may be losing steam. A potential bearish crossover could signal a reversal in trend.
RSI and Stochastic RSI
Both the Relative Strength Index (RSI) and Stochastic RSI are in overvalued territory, with readings above 60. Historically, when RSI and Stochastic RSI have reached 60+ levels, they tend to retreat significantly, often accompanied by a sharp price decline.
Support and resistance levels
The current price action shows strong resistance levels at $8.5 and $10. These levels have proven difficult to surpass or acted as strong support levels in the past. Meanwhile, the $7 level serves as a weak area. Currently, it has acted as resistance, but its role could change if HNT breaks above it. If the price fails to break through $7, a more pronounced downtrend is likely to begin.
Fibonacci confluence levels
By applying Fibonacci retracement levels from three different time frames—the initial day of trading to the recent high, the low of June to the recent high, and the high of March to the low of June—we identify multiple confluence levels. These confluence levels are clustered around $6 and $4.7.
The area between $4.7 and $6 forms what we refer to as a “box of opportunity.” This range presents a potential target zone for a short position, with the expectation that HNT could retrace this area if the downtrend continues.
Historical support lies at $3, but a drop to this level seems unlikely unless significant negative events occur in the broader market, similar to what happened with Japan’s surprise rate hike and Jump Trading’s selling spree in late July and early August.
Strategic Considerations
Before initiating a short position, it’s important to confirm the downtrend. Although the trend has recently shifted, there’s always the possibility of a bear trap. To minimize risk, we recommend waiting for HNT to fall below $6.3958, which is the 23.6% Fibonacci retracement from the June low to the August high. Once HNT breaks below this level, and it acts as resistance, the shorting opportunity becomes much safer.
Another factor to consider is the Visible Range Volume Profile, which shows a weak volume area between $5.5 and $6.5. Prices tend to move quickly through such low-volume zones, further supporting the likelihood of a downward move. However, currently, HNT is within a high-volume zone, which could potentially serve as a consolidation area.
The Chart of the Week series has consistently delivered accurate predictions, and the past two weeks’ focus on Aave and Sui is no exception. Both tokens moved as anticipated, allowing traders to hit profit targets and realize substantial gains.
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Aave smashes all 4 profit targets
From August 2 to August 5, Aave’s price action followed the pattern we predicted, hitting all four profit targets within just three days.
Source: TradingView
The $115 resistance level has a history of acting as a strong barrier for Aave. Our analysis suggested that this resistance would hold, and Aave would likely face a pullback. Traders who followed our guidance and entered a short position around the $115 mark saw major returns as Aave declined by -21.74%.
Source: TradingView
Sui Hits $1
Sui presented a different opportunity, with our analysis identifying a potential for upward movement. For traders who followed our advice and used the hourly chart to time their entry, an optimal position could have been taken around 10:00 AM UTC on August 10 at $0.88.
Source: TradingView
Again, by Monday, in just three days, the price action hit both profit targets at $0.9271 and $1.00, resulting in a 13.64% gain for those who exited at the second target.
Source: TradingView
Conclusion
The effectiveness of the Chart of the Week analysis will continue to manifest in the long term, but the prediction success rate currently stands at 92.31%, with 12 out of 13 trades being successful. Stay tuned for future analysis each Friday.
Bitcoin’s recent rally could be setting the stage for a downturn, as several indicators suggest. The recent distribution of BTC from Mt. Gox, coupled with the German government’s large-scale sell-off, initially dampened Bitcoin’s price but led to a temporary recovery. However, metrics such as the Net Unrealized Profit/Loss and Stochastic RSI are signaling potential declines ahead. The article examines how these factors might affect Bitcoin’s future movements.
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Mt. Gox distributions and German government sell-offs
July and August brought a cascade of bad news for Bitcoin (BTC). The month began with the turmoil initiated by the German government’s large-scale BTC liquidation and the commencement of Mt. Gox’s distribution process.
The initial wave of selling from Germany triggered a downtrend in Bitcoin’s price, which reached a low of $53,542 on July 5.
Source: Glassnode. Mt. Gox and German government BTC balance change, June-August 2024
The decline was further intensified when Mt. Gox released 2,701 BTC. By then, Germany had already offloaded 9,332 BTC during its selling spree. After July 5, Bitcoin’s market began to recover, even though Germany sold another 59,190 BTC. By July 12, the price had climbed to $57,889, marking an over 8% recovery.
The recovery shows that after the initial selling pressure eased, Bitcoin became more appealing to investors. The market’s ability to absorb the government’s selling pressure hinted at a growing demand. Later, news that Germany had sold all the BTC held in its wallets led to further price appreciation.
Even the larger Mt. Gox movement of 49,079 BTC failed to halt the upward trend, which saw a 26% increase from the July 5 low. Although subsequent distributions from Mt. Gox did create short-lived dips in the market, they did not stop the overall recovery.
1/ @krakenfx has successfully distributed #Bitcoin and Bitcoin Cash from the @mtgox estate back to creditors.
It’s been nearly a decade since Kraken was selected by the Trustee to facilitate the investigation and return of client funds. It was our privilege and it was our duty. pic.twitter.com/ptKexzN4gm
The psychological factor likely played a big role here. Those receiving BTC from Mt. Gox had not been holding the cryptocurrency over the years by choice; they simply had no access to it until the recent distributions. Over time, many may have realized that keeping BTC could be more beneficial than selling it right away. The mindset shift likely came from Bitcoin’s past price highs in 2017, 2021, and even 2024. If they had had their BTC during those peaks, many might have sold their holdings. Instead, the forced delay unintentionally positioned them as long-term holders, which worked to their advantage. The perspective is supported by the market’s reaction to the distributions. The minor 4% drop observed after Kraken and Bitstamp began their distributions on July 24 was quickly absorbed, indicating that the selling pressure from these recipients was relatively low.
The pattern suggests that future distributions of the remaining 65,476 BTC from Mt. Gox are unlikely to cause significant market disruptions. Any potential disruptions are expected to be quickly absorbed by the market, as most recipients are likely to hold rather than sell their assets.
Entity-Adjusted Dormancy Flow as a predictor of Bitcoin market bottoms
Entity-Adjusted Dormancy Flow (EADF) measures the ratio between the current market capitalization and the annualized dormancy value. Dormancy value is the average number of days that each BTC remains dormant (held without being moved) multiplied by the amount of BTC moved on that day and then converted into USD. The metric provides insight into the behavior of long-term holders by indicating how much “older” Bitcoin is being spent or moved in the market.
Source: Glassnode. Entity-adjusted dormancy flow of BTC, 2010-2024
This tool has proven indispensable in timing market lows and assessing whether the Bitcoin market remains within typical parameters during a bullish trend or is shifting toward a bearish phase.
Each time EADF drops into the green zone, between $170 and $250, it signals a market low. The lower band, especially around $170, has consistently predicted Bitcoin’s price bottoms with good accuracy. Recently, on August 5, EADF hit a low of $184, which, based on past data, likely indicates Bitcoin has reached its bottom. The following upward movement of EADF suggests the start of a recovery phase, which, if patterns hold, could lead to an appreciation of Bitcoin’s price in the near future.
Source: Glassnode. Entity-adjusted dormancy flow of BTC, year-to-date
Net Unrealized Profit/Loss as a predictor of Bitcoin market tops
Net Unrealized Profit/Loss (NUPL) is a metric that reflects the overall sentiment of Bitcoin holders by quantifying the difference between the total amount of Bitcoin that is in profit (relative unrealized profit) and the total amount of Bitcoin that is at a loss (unrealized loss). NUPL, therefore, represents the net result of these two figures, indicating whether the market, on average, is in a state of profit or loss.
Source: Glassnode. Net unrealized profit/loss of BTC, 2010-2024
Historically, every time NUPL has risen above 0.4, it has signaled that Bitcoin may be entering a phase of overvaluation. However, this does not necessarily mean that Bitcoin’s price will immediately start to decline. Previously, from 2010-2011, 2013-2014, 2017-2018, and 2020-2021, NUPL remained above the 0.4 threshold for extended periods—sometimes nearly a year—before eventually dropping below it, marking the end of a bullish phase.
Given the current market conditions, it is possible that Bitcoin may stay in the NUPL zone above 0.4, occasionally dipping barely below it, until a market top is reached, which could occur around 2025. However, a closer resemblance might be drawn to the scenario in 2019.
During that year, NUPL reached 0.4 in June and remained at that level until August, after which it began to decline. A key factor influencing this was the Federal Reserve’s decision to lower interest rates starting on July 31. The rate cut, coupled with the subsequent halt in further cuts or hikes, may have contributed to the decline in NUPL and the corresponding downtrend in Bitcoin’s price.
Source: TradingView. BTC price vs. interest rates, 2015-2024
By March 2020, NUPL had dropped below 0, coinciding with the onset of the COVID-19 pandemic and the Federal Reserve’s decision to stop adjusting rates for a prolonged period. Once the Federal Reserve ceased cutting rates, both Bitcoin’s price and NUPL reversed their downward trends and began to rise again. With the Federal Reserve expected to cut rates in September, a similar pattern to 2019 might occur, possibly leading to a decline in Bitcoin’s price.
Source: CMEGroup. Federal Reserve rate target probabilities, September 18 2024
Stochastic Relative Strength Index patterns in Bitcoin market cycles
Stochastic Relative Strength Index (Stoch RSI) is a momentum indicator that traders use to assess the potential direction of an asset’s price by comparing the current closing price to its price range over a specific period. It is an oscillator that measures the level of the RSI relative to its high-low range over a set period rather than comparing price levels. This makes it more sensitive to recent price changes and provides information about potential overbought or oversold conditions.
The Stoch RSI oscillates between 0 and 1, with readings above 0.8 typically indicating overbought conditions and readings below 0.2 indicating oversold conditions. However, rather than just looking at whether the indicator is overbought or oversold, a more nuanced approach involves examining the behavior of the Stoch RSI as it breaches these levels.
Historically, when the BTC’s Stoch RSI has breached its upper band (downward trend), then fallen below the lower band (oversold), and later breached the lower band again on its way upward, Bitcoin’s price has typically experienced a decline. On average, from the open price on the day of the first breach below the upper band to the open price on the day of the first upward breach of the lower band, Bitcoin has seen a decline of -22.89%.
This method is preferred because it avoids the pitfalls of false signals. Simply relying on the Stoch RSI topping or bottoming can be misleading, as the indicator might give false bottoms where it briefly rises before dropping again. By waiting for the sequence of breaches—first of the upper band, then the lower band, and finally the upward breach of the lower band—the analysis achieves a higher success rate, albeit at the cost of potentially being late to the trend.
However, if the anomaly of the 2014-2015 period is excluded, the average drawdown is significantly steeper, around -48.45%. For simplicity, this figure can be rounded to a 50% average drawdown.
Currently, examining the monthly view, Bitcoin has declined by -10.2% from the open prices, which indicates that if the historical trend holds, the price could drop further to around $36,000 this year. Nonetheless, there is an alternative scenario similar to what occurred during the last halving cycle in 2020.
In 2020, the Stoch RSI did not breach the lower band but instead showed a pattern where it breached the upper band, then the middle band, and finally breached the middle band again on its way up. If this pattern repeats, Bitcoin might stabilize around $58,000 to $60,000—a level it is currently hovering around. If this scenario plays out, it could mark the last significant bottom for Bitcoin before the next major bull run, much like what happened after the 2020 halving.
Conclusion
In light of the current indicators, Bitcoin faces a challenging road ahead. With three out of four key metrics signaling bearish trends, the potential for further price declines seems strong. While the dormancy flow indicator remains within its typical range, history shows that it can dip below the lower band, suggesting that downside risks are still present. As a result, our outlook remains cautious, and we expect Bitcoin to stay below $60,000 until at least late September or October.
