Crypto Market Drops Again; Bitcoin (BTC) Price Impacted by Weak Recovery
The cryptocurrency market took a downturn from yesterday. Is more downside ahead, and when can we see a sustained uptrend?
Key Takeaways
- The cryptocurrency market failed to sustain recovery in early September.
- Bitcoin dominance nears a peak, signaling potential altcoin season.
- Bitcoin is in a corrective phase; key support at $55,300 is critical.
Earlier this week, the cryptocurrency market fell to $1.964 trillion on Sep. 1 but started to recover the next day. The following recovery stopped on Sep. 3 at a high of $2.05 trillion, an increase of 4.65%, which was a bullish sign. Some altcoins even experienced double-digit gains, and the sentiment appeared bullish.
However, the short-lived momentum made a downturn, leading to lower values than on Sep. 1. The market turned red and went beyond the starting point of its latest recovery. With this in mind, are we still in a more significant downtrend from the end of August, or will we see the end of this bearish phase shortly?
Market Cap
After reaching $2,727 trillion on March 14, the total cryptocurrency market cap started in a long-lasting descending channel. Its March high concluded a five-wave pattern dating from the end of December last year, which is why the following descending structure has lasted for 175 consecutive days now.
There was a slight chance that Aug. 5 would complete this stage, but the following ascending move showed choppy price action and ended on a lower high before falling back down. Thus, it indicated that the market didn’t have the strength to commence a new bull phase.
However, considering the longevity of this correction and the 29% decrease from its yearly high, the bull phase could start after the current downtrend.
Bitcoin Domaince Could be Reaching Peak
Bitcoin’s market dominance has risen steadily from a low of 39% in November 2023, reaching a peak of 57% on April 13, 2024, following a major market downturn—the highest level since April 2021.
However, this upward momentum has slowed since January, forming an ascending triangle pattern, often signaling the final phase of an uptrend. This pattern, resembling a rising wedge, suggests that Bitcoin’s dominance could be nearing its peak as it completes a five-wave advance.
As the BTC dominance currently interacts with the ascending triangle’s resistance, a rejection below 58% could signal the potential onset of the altcoin season and a favorable market environment for bullish price action in general.
Bitcoin On-Chain Data
The number of BTC in exchange reserves dropped to 2,616,248 on Sep. 4, continuing the downtrend from a high, slightly above three million in January. The reserves are stabilizing around this level, but this is the all-time low amount of BTC held on exchanges.
A decreasing amount of Bitcoin on exchanges is generally considered a bullish indicator, suggesting continued on-chain accumulation. Interpreting this chart means that the accumulation persisted throughout 2024 despite the market turbulence.
Looking at the significant indicator of the Bitcoin cycle context, the MVRV ratio (Market Value to Realized Value), we can see that there is still more room for the upside until it reaches its overbought territory. According to the Woobull chart, the ratio currently stands at 1.37 and usually tops out at a value above 4.
This makes the case for Bitcoin being around its cycle mid-point with more room toward the upside. Worth noting is that the top values diminish with each cycle, so the last time Bitcoin reached an all-time high, it was 4, while its 2018 peak record MVRV was 4.85.
Bitcoin Price Context
Since August 5, Bitcoin‘s price has steadily climbed, reaching $65,000 by Aug. 25. However, it failed to form a five-wave pattern, which would have confirmed the start of an impulsive uptrend.
Instead, the price fell below the $62,000 mark, invalidating the possibility of an uptrend according to Elliott Wave Theory, as this area marked the first sub-wave of a lower degree. There is still some chance that the uptrend from Aug. 5 to 25 was a five-wave impulse, and the price will shortly receive a signal.
Bitcoin has been in a descending channel since its all-time high of $73,770 in mid-March, indicating a corrective phase. It now appears one final leg down remains before completing the WXYXZ correction.
The key will be holding above the $55,300 support at the 0.618 Fibonacci level. If it does, a breakout above the descending resistance is possible, but more likely, a further drop to $51,700 may occur before the correction ends.
Conclusion
Considering all the data analyzed, there is a strong possibility Bitcoin has been in its corrective phase since its all-time high, and another bull phase should start after it ends. Whether this correction ended on Aug. 5 or whether we have yet to see its completion is still in question.
The determining factors will be what happens at the current interaction with Bitcoin’s 0.618 Fibonacci retracement; if we see a bounce, it could lead to more upside, proving that the bull phase started on Aug. 5.
Alternatively, Bitcoin could face more downside if we see a further decline. Its first target is around $50,000, but it could proceed even further below it.
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