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▲ Bitcoin (BTC), Cryptocurrency Decline, US, Japan/AI Generated Image
A warning that the sell-off cycle, which has repeatedly occurred after temporary rebounds in past bear markets, has returned to the Bitcoin (BTC) market, is increasing investor tension.
Cryptocurrency analyst Benjamin Cowen diagnosed the recent Bitcoin rebound not as the beginning of a full-fledged bull market, but as a typical bear market rally, in a video uploaded to his YouTube channel on May 25 (local time). Cowen stated, "The price correction that occurred for two consecutive weeks recently is a precursor to further declines," adding, "There is a high probability of a strong low sweep breaking the $60,000 support level in the short term." He believes that as Bitcoin has been pushed back from technical resistance levels compared to the New York stock market, including the S&P 500, it could continue to underperform stock market returns for the next few months.
The first reason Cowen presented is the seasonality and downward cycle repeated in every midterm election year. In the midterm election years of 2014, 2018, and 2022, a strong sell-off occurred in June after corrections in February and April. It typically took 20 to 21 weeks to form a final low after the previous high in a bear market, and Bitcoin is currently in its 16th week of a downward cycle. The remaining approximately four weeks of the decline period coincide with late June, when major macroeconomic financial policy meetings are concentrated.
The macroeconomic environment is also weighing on Bitcoin. The cryptocurrency market tends to react more sensitively to global liquidity and central bank policy stances than the stock market. As the U.S. bond market begins to price in the possibility of the Federal Reserve raising interest rates, investor sentiment towards risky assets is rapidly contracting. Analysis suggests that if instability in the Middle East leads to rising oil prices, inflationary pressures could increase again, and concerns about further interest rate hikes could put stronger pressure on the market.
The mid-June Federal Open Market Committee meeting and the Bank of Japan's interest rate decision schedule were also cited as key market variables. Cowen referred to past instances where large-scale sell-offs and capitulation sales occurred in the Bitcoin market after the Bank of Japan's surprise interest rate hike, pointing out that if monetary tightening events overlap in late June, the risk of cascading liquidations in the virtual asset market could increase. The recent decoupling, where Bitcoin has underperformed alone while the New York stock market shows an all-time high trend, was also presented as a warning sign.
Cowen assessed that the strength of the New York stock market is a limited rally driven by expectations of AI-related big tech earnings. He explained that liquidity to push up the virtual asset market is still insufficient. Analysis of the Bitcoin vs. S&P 500 relative value chart also showed that the 20-week simple moving average and the 21-week exponential moving average acted as strong selling walls in every midterm election year, and this time too, a downward trend appeared after encountering resistance in that range. In the current structure, where long-term trend lines have not been recovered, the risk of retail investor leverage liquidation and further corrections remains a major burden on the market.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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