Key Points
- Bitcoin's recent surge to $66,921 has faltered at a critical resistance level, leading to a decline back to $63,422, resembling a classic bull trap.
- Major indicators on the daily chart indicate a bearish trend.
- Traders are more inclined to predict a drop to $55,000 before reaching $84,000.
The cryptocurrency market opened with losses and continued to decline.
South Korea's KOSPI index experienced a drop of over 8% at the opening, triggering a circuit breaker and causing a ripple effect of risk aversion across global markets before New York traders had even begun their day. Bitcoin reacted swiftly, dropping to $62,684 in early trading, attempting a brief recovery before stagnating.
According to Decrypt's morning report, Bitcoin was priced at $63,400, reflecting a 2.7% decrease, while Ethereum fell by 4.2% to $1,875 and Solana dropped 4.4% to $73. In the past 24 hours, over $670 million in crypto positions were liquidated, with $533 million coming from long positions—indicative of a market reacting to a false rally.
Oil prices declined by 2%, and gold saw a 1% drop. The Nasdaq futures also turned negative, influenced by weakness in technology stocks. The Federal Reserve, however, remained unchanged—an issue many investors are concerned about.
The Federal Open Market Committee is convening today and tomorrow, with Fed Chair Kevin Warsh expected to announce decisions and hold a press conference on July 29. Market expectations lean towards maintaining rates between 3.50% and 3.75%. However, memories of Warsh's previous press conference, which raised the odds of a rate hike to 70% and caused a significant jump in 2-year Treasury yields, have led traders to reduce their positions instead of holding through this period. The stock market displayed mixed results: Dow futures rose by 0.7%, while Nasdaq futures fell by 0.9% due to the struggling tech sector. Crypto assets, in particular, are facing greater declines than most.
Bitcoin's price action: The recent rise appears to be a trap.
Looking back at the earlier session, Bitcoin's attempt to reach $66,921 initially sparked optimism among traders. They pointed to the 200-day exponential moving average (EMA) holding steady. However, a closer examination of the charts reveals a different narrative.
From Monday to Tuesday, Bitcoin erased all gains from the previous week, reversing the bullish trend and re-entering bearish territory, nearly mirroring the pre-bounce conditions. The current resistance level parallels previous ones that marked declines from May to July.
Bitcoin price data. Image: TradingviewWhen viewed on a broader scale, the daily chart dating back to September 2025 presents an even less encouraging picture.
For months, Bitcoin has been trading significantly below both the cloud and its 200-day average. While sporadic weeks of gains occur, they are quickly sold off, and the downward trend resumes. This week appears to be following a similar trajectory.
The three bearish resistance levels (the blue line from November 2025 to April, the white line from May to July, and the current one forming) are aligned:
Bitcoin price data. Image: TradingviewIndicator Analysis
The exponential moving average structure is clearly bearish. EMAs provide insights into price levels relative to historical averages—lower prices indicate a weaker trend. The current setup—where the 50 EMA is below the 200 EMA, with prices beneath both—illustrates a death cross that has persisted for several months.
The Relative Strength Index (RSI), which gauges buying and selling pressure, stands at 46.5. This figure below 50 suggests a bearish inclination, lacking the oversold conditions that might attract bargain hunters (typically below 30) and failing to indicate substantial buying momentum. A neutral to slightly bearish interpretation seems appropriate.
The Squeeze Momentum Indicator has been active for nine bars, a noteworthy duration. This suggests that a price movement is imminent. However, squeezes typically resolve in the direction of the prevailing trend, which, according to all indicators, is downward. The momentum reading within the squeeze shows only a slight bullish indication of 0.25v, which is not characteristic of a forthcoming upward breakout.
Traders' Predictions
On the Myriad prediction market, created by the parent company of Decrypt, traders are assessing whether Bitcoin will hit $84,000 or $55,000 first. Currently, the odds favor a drop to $55,000 at 65.7%, compared to a 34.3% chance for a rise.
This marks a significant shift from March, when the sentiment was nearly reversed before Warsh's first hawkish press conference. Traders have been adjusting their expectations for Bitcoin's downside for several months, and the current technical indicators do not provide motivation to alter that perspective.
While there is a potential bullish scenario, it hinges on a significant dovish surprise from the Fed tomorrow—if Warsh indicates a cautious approach to rate hikes, it could trigger an upward resolution of the squeeze and push through the $65,302 Fibonacci level. Additionally, any revival of the Senate's Clarity Act could provide favorable regulatory support. However, both scenarios depend on external factors outside the current chart, which largely leans bearish.
At present, the rise to $66,921 resembles a classic bull trap: a rally hitting resistance, a failed breakout, a return to previous lows, and a buildup for the next move. The indicators suggest that the next movement is unlikely to be upward.
Disclaimer
The opinions expressed by the author are solely for informational purposes and should not be construed as financial, investment, or other advice.