It was a sea of green in the crypto industry as the recent rebound continued. Bitcoin has rebounded back to over $62,000, a remarkable comeback for a coin that crashed to $49,000 earlier this week.
Bitcoin’s comeback has triggered a strong rally among altcoins, helping push the total market cap of all coins to over $2.15 trillion. Some of the best-performing altcoins were Sui, Helium, Celestia, Pepe, JasmyCoin (JASMY), Hedera Hashgraph (HBAR), and Brett, which have all soared by over 30% from their lowest point this month.
Bitcoin bullish patterns
The first key reason why altcoins like Hedera and Jasmy are soaring is that Bitcoin has formed three important bullish chart patterns.
First, the coin formed a hammer candlestick pattern, which is one of the most popular reversal signs in the market. A hammer happens during a downtrend and is usually made up of a long lower shadow and a small body.
Second, Bitcoin has formed a falling broadening wedge candlestick pattern, where the upper trendline connects lower highs and the lower line links the lower lows. In most cases, this pattern results in a strong bullish breakout, especially when it is supported by volume. As shown below, Bitcoin’s volume has been in a gradual increase lately.
#Altcoins are bouncing back firmly. Some of them are making green weekly candles.
I think that,
– #Bitcoin closing above $56K
– #Ethereum above 0.043/0.044
– #Altcoins green weekly candlesMight indicate that we’re heading towards the start of a bull cycle.
— Michaël van de Poppe (@CryptoMichNL) August 8, 2024
Third, Bitcoin seems to have avoided a death cross now that it has jumped above the 200-day Exponential Moving Average (EMA). Forming a death cross would have triggered more downsides for BTC and other altcoins.
Recession is a good thing for crypto
These altcoins are also rising because of the rising odds of a US recession or a slight hard landing. Recent economic numbers have shown that the economy is not doing well, with the unemployment rate rising to 4.3% and wages falling.
A rising unemployment, especially when it is consecutive, often leads to a recession. Also, notably, the yield curve has started to de-invert after being inverted for years. That could be a sign that a recession is coming.
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In theory, a recession should be a bad thing for stocks, cryptocurrencies, and other assets. However, in reality, history shows that these assets do well when there is a recession because the Federal Reserve and other central banks respond by cutting interest rates.
Economists already expect the Fed to start cutting in September. Some then anticipate 100bps cuts by December while others see it slashing by 125bps. In a note, ING said:
“At the moment we are leaning in the direction of a 50bp in September followed by a series of 25bp moves that would get us back to a Fed funds rate of around 3% by next summer – broadly in line with the Fed’s “neutral” viewpoint.”
Bitcoin and other altcoins do well when the Fed is slashing interest rates as happened during the Covid-19 pandemic. These rate cuts will be important since investors have allocated over $6.1 trillion in low-risk money market funds. When rate cuts start, there are chances that some of these funds will flow to cryptocurrencies.
These facts explain why even stocks have rebounded. The Dow Jones Industrial Average rose by over 680 points while the Nasdaq 100 index jumped by 465 points. In Asia, the Nifty 50 and BSE Sensex rose by over 1% while the Nikkei jumped by 1%.
Current Market expectations for Fed Rate Cuts…
-Sep 18, 2024: 50 bps cut to 4.75-5.00%
-Nov 7, 2024: 25 bps cut to 4.50-4.75%
-Dec 18, 2024: 25 bps cut to 4.25-4.50%
-Jan 25, 2025: 25 bps cut to 4.00-4.25%
-Mar 19, 2025: 25 bps cut to 3.75-4.00%Video: https://t.co/PU3gn1fTbD pic.twitter.com/xuqDaimCyG
— Charlie Bilello (@charliebilello) August 7, 2024
Potential dead cat bounce
The other reason why altcoins like Hedera, Brett, Jasmy, and Pepe are rising is that this could be a dead cat bounce. In technical analysis, a dead cat bounce is a situation where an asset stages a brief pullback and then resumes the downward trend.
A dead cat bounce is often seen as a bear trap, which is a situation some investors buy the dip and then suffer substantial losses when it reverses.
In some cases, these bounces last just a few days or a few weeks. In this case, the dead cat bounce will be invalidated when the price crosses the key resistance point at $72,000, where it failed to move above in July.
If this is a dead cat bounce, then it means that these tokens could suffer a harsh reversal in the near term.
Fear and greed index rising
Meanwhile, these tokens are rising because of the fear and greed index, which has moved from the fear zone of 35 to a neutral point of 56. If this trend continues, there are signs that it will move to the greed zone of 60 soon. Cryptocurrencies do well when there is a sense of greed in the market.
Additionally, there are some regulatory reasons for the rally. On Wednesday, Ripple Labs won a big reprieve in the US as a judge ordered it to pay $125 million. While this is a big number, it is peanuts compared to the $2 billion that the Securities and Exchange Commission (SEC) was seeking.
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