Crypto Market Stabilizes as Downtrend Tapers: What Could Cause the Next Rally?

While market participants hope that BTC makes a positive turn from this crucial level, historical patterns suggest that more bloodshed may occur.

This past week saw Bitcoin (BTC) rise above critical resistance levels following the carnage weeks ago. The slow but steady recovery of assets is a signal that the market is stabilizing. This leaves analysts guessing as to what catalyst could trigger the next rally.

In the latest edition of the Bitfinex Alpha reportMarket experts predicted that changes in the macroeconomic landscape could drive liquidity into Bitcoin. Volatility in traditional asset classes, such as oil and fiat currencies, could help stabilize the crypto market and drive positive price movement in the coming weeks.

Crypto market stabilizes

According to Bitfinex, BTC last week traded below the short-term holder cost basis (STH) of $113,600, which is hovering around the quantile level of 0.85. These dynamics indicated signs of market fatigue and declining momentum. However, the market turned for the better this weekend as US-China tariff talks progressed and BTC regained these resistance levels.

Nevertheless, the STH cost basis remains crucial for BTC to sustain a bullish trajectory. BTC must remain above $113,600 to trigger a shift in market structure from defensive to constructive.

While market participants hope that BTC makes a positive turn from this crucial level, historical patterns suggest that more bloodshed may occur. Persistent weakness below the STH cost basis has historically indicated structural weakness and often preceded deeper corrections towards the 0.75 quantile, which is now around $97,500.

Currently, BTC is hovering above $114,400; however, a drop below $113,600 could trigger a drop to $97,500. This level could serve as the low point of this consolidation phase. Analysts say a move towards this lower limit will be consistent with previous cycle patterns. The silver lining is that such a move will mark the exhaustion of selling pressure and lay the foundation for the next uptrend.

Fleeting macro landscape

As the market prepares for the next step, changes in energy prices and currency markets are affecting global liquidity flows. Fortunately, cryptocurrencies appear to be absorbing some of the capital rotation.

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There has been a rise in oil prices and currencies as the Japanese yen has weakened. These developments, coupled with geopolitical tensions, have prompted investors to reassess their exposure to risky assets. Institutional traders are now evaluating their investments in bonds and stocks and are likely leaning toward cryptocurrencies.