Bitcoin is Oversold. A Relief Rally May Be Imminent| Matrixport Research

Risk assets continue to be affected by the primary macro economy, and inflation data may affect the recent market

A relief rally may be imminent as Bitcoin awaits the US inflation data next week. Prices are currently oversold; historically, Bitcoin tends to rebound in such conditions. The upcoming inflation data could catalyze the bulls.

While the primary macro driver for risk assets remains crucial and has recently shifted to economic growth and labor market concerns, traders might still respond positively to a lower inflation print, especially if it falls below the 3.0% mark.

Invest in options to protect portfolios is a good choice

Like last year, we recommended capitalizing on the low volatility that made options prices attractive. Protecting portfolios with inexpensive put options or using minimal risk capital to buy upside calls was an effective strategy to safeguard Bitcoin exposure during uncertain times. Like last year, the 30-day realized volatility fell to the mid-20%, before spiking higher.

We’ve consistently warned that volumes and liquidity tend to be lower in August, often bringing weak returns. Monday’s 18% decline highlighted our comment from last week’s Matrix on Target report that “prices have lost momentum recently, and with a weak seasonal period ahead, the trading environment may remain challenging.”

The US presidential election is still unclear

While Trump seemed likely to win the November 2024 US presidential election, Joe Biden’s replacement by Kamala Harris has narrowed the Republicans’ odds. Harris now leads Trump in the polls, impacting Bitcoin traders as Biden’s replacement on July 21 coincided with Bitcoin’s rally losing steam.

Conclusion

Investors should monitor if traders are buying the dip. Despite significant outflows from Circle’s stablecoin last week, more robust inflows this week could indicate dip buying. With the relative strength index (RSI) at 30%, a buying opportunity may be present, similar to June 2024.

While corrections occur, opportunities when the RSI falls below 30% are rare during Bitcoin bull markets.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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