Broadening Wedge or Bull Flag? Bitcoin Shows Signs of Losing Momentum

September 02, 2024 09:16 PM AEST | By Team Kalkine Media

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Broadening Wedge or Bull Flag? Bitcoin Shows Signs of Losing Momentum — Image source: shutterstock

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Despite ongoing accumulation by traders, significant market participants, and ETFs during major price dips, Bitcoin continues to exhibit diminishing momentum, raising questions about the sustainability of the current bull market.

On a weekly timeframe, {Bitcoin} (BTC) price chart displays what some analysts refer to as a bull flag or broadening wedge pattern. If this pattern plays out as expected, Bitcoin could reach new all-time highs. However, Bitcoin remains constrained by overhead resistance and is influenced by macroeconomic factors. According to Glassnode’s latest The Week Onchain Newsletter, Bitcoin's strength appears to be waning, with the market entrenched in a “structurally ordered downtrend” over the past five months. The decline in interest in leveraged positions and the cooling effect following the spot Bitcoin ETF launch have contributed to this trend.

Key bullish catalysts, such as significant policy shifts or substantial increases in ETF inflows, are anticipated to unfold further in the future. Analysts have noted that the initial bullish drivers are now realized, with the market awaiting new, impactful events to reignite momentum.

Technical indicators suggest concerns. Bitcoin has repeatedly failed to establish $70,000 as support, and lower highs at each breakout attempt signal a loss of momentum. The Moving Average Convergence Divergence (MACD) indicator has declined, widening the gap between the MACD and the signal line, reflecting a drop in momentum similar to previous market cycles. Similarly, the Relative Strength Index (RSI) has fallen from a peak of 88.47 in early March to 44 in August, mirroring the decline in Bitcoin's price.

Aggregate trading volumes have also been decreasing, with the Apparent Demand metric from CryptoQuant indicating a significant slowdown. This decline follows the initial excitement surrounding the spot ETF approvals.

Recent price rallies have been largely driven by futures market liquidations rather than spot market demand. As a result, Bitcoin’s ability to break through resistance levels has been constrained by insufficient sustained spot purchasing. While Bitcoin’s price may continue to fluctuate within the current range, traders should monitor for a reversal in declining volumes and observe how price movements are influenced by futures market dynamics.

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