Bitcoin Bulls Fail Again, but There Is Still Hope

• BTC bulls failed to penetrate critical resistance after positive U.S. inflation data, leaving the doors open for more losses.
• Downside may be limited as recent supply overhang from Germany's Saxony state has exhausted.
• Fed rate cut bets, FTX repayments may offer support, according to a prime broker.

Thursday was a significant day for crypto markets as bitcoin BTC$93,115.36 failed to surpass a key resistance despite a positive U.S. inflation report, maintaining the downward trajectory observed since early June.

On Thursday, after the U.S. reported the first drop in consumer prices in four years markets quickly lifted the Fed rate cut bets, sending higher-risk assets, including BTC.

For a moment, it appeared that bitcoin bulls would establish a foothold above the descending trendline, characterizing the sell-off from June highs near $72,000. Such a move would have signaled an end to the pullback and could have drawn in momentum traders, as discussed in Thursday's First Mover America.

Read more: Fed Might Focus on Weakening Labor Market Rather Than Inflation as It Mulls Rate Cuts: Economists

However, bullish hopes were quickly dashed as prices turned lower from the trendline resistance, falling below $57,000 early today.

The latest bull failure, observed against the backdrop of positive macro news flow, might mean more price weakness ahead. A similar trendline rejection on July 1 proved costly, deepening the sell-off.

Still, there is hope for the bulls. The daily chart MACD histogram, an indicator used to gauge trend strength and changes, is teasing a crossover above zero, a sign of an impending bullish shift in momentum.

The supply overhang from Germany's Saxony state, which catalyzed the price drop early this month, is nearly running dry. Besides, it remains uncertain what percentage of the 95,000 BTC, which represents a portion of the total 140,000 BTC scheduled to be distributed to Mt. Gox's creditors, will be liquidated.

"The prospect of some of the $16.3 billion FTX repayment over the next months translating into buying pressure, the increasingly positive stance toward crypto on both sides of the aisle, and the potential of an interest rate cut in September benefiting risk assets more generally should embolden medium- and long-term bulls," crypto prime broker FalconX said in a newsletter Friday.

FalconX added that potential selling by Mt. Gox's creditors may have a different profile than Saxony's sales. "For example, maybe more flow will go to exchanges versus professional liquidity providers, or maybe a more diversified holder base will out sales over time," FalconX noted.