- Bitcoin prices slipped 4.5% on the back of a death cross setup and US dollar rally.
- But BTC/USD could experience bullish pressure due to the US government’s debt defaulting risk.
- Also, Bitcoin reserves on crypto exchanges have hit a 3-year low.
- Long-term holders of the top cryptocurrency control majority of the supply.
JAIPUR (CoinChapter.com) – A death cross setup and a soaring US dollar triggered a 4.5% drop in Bitcoin’s price on Monday. But even with the BTC/USD pair slipping from $46,403 to $44,295, a flurry of bullish factors signaled a long-term uptrend for the top cryptocurrency.
US Government’s Debt Default Risks
Last Wednesday, US Treasury Secretary Janet Yellen rang the alarm bells on the country’s rapidly depleting cash reserves. As per Ms. Yellen, her office will run out of all available greenback liquidity next month. Consequentially, US lawmakers are at loggerheads to raise the federal government’s borrowing limits.
In detail, the Democrats and Republicans are discussing the possibility of raising the US debt ceiling. It limits the amount of cash that the US Treasury can borrow to pay off government bills. As per reports, the debt ceiling was suspended under the Trump administration in 2019 and brought back again on August 1. The figure currently stands at $28.5 trillion.
Failure to raise the debt ceiling would make it impossible for the US government to pay its debts, leading to a default. Unfortunately, Republican Senate Minority Leader Mitch McConnell has already voted against raising the debt ceiling, causing a political deadlock.
Treasury Secretary Yellen indicated that the same would have drastic consequences on the US economy and markets.
“waiting until the last minute” to avert a debt limit crisis could cause “serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States”Yellen wrote in her letter to US lawmakers.
The credibility of the US dollar looks to depreciate, making Bitcoin a feasible hedging alternative. But the benchmark cryptocurrency’s bullish potential stands on more legs.
Bitcoin Reserves On Crypto Exchanges Hit 3-Year Low
The accumulated volume of Bitcoin reserves on crypto exchanges has dropped to levels not seen in the last three years. CryptoQuant pointed it out on Monday.
As per the on-chain crypto market insights provider, bullish investors remained unfazed by the latest Bitcoin price drop. The recent rise in the flagship cryptocurrency’s price from below $30,000 to $53,000 was marked by rapid withdrawals off crypto bourses.
After rising to 2.55 million on July 26, Bitcoin exchange reserves dropped significantly through August, reaching the 2.43 million figure on September 6, 2021 (when the BTC/USD pair topped $53,000).
More Long Term Holders
Glassnode’s recent observations reinstate bullish confidence in Bitcoin.
“Long-term holders now own 79.5% of the $BTC supply, equivalent to Oct 2020.”said the Zug-based crypto market provider in a latest tweet
Bitcoin buyers who believe in the long-term potential of the asset remained nonchalant during May’s market drawdown. Some of them are held by institutional asset management firms, including GBTC.
“It also indicates $BTC purchased in Q1 to Q2 2021 remain tightly held, with investors unshaken by a 50%+ drawdown. Note, some of these coins are likely held by GBTC and custodians.”
Deep-pocketed investors gobbled up nearly 17% of Bitcoin’s supply from January 2021 to May 2021.
BTC/USD Technical Setup
DUE TO THE ONGOING SELLING PRESSURE, the BTC/USD pair is currently breaking out (below) of a bearish symmetrical triangle setup. In addition, the pair’s momentum below the 50-day moving average (50 MA) and 200-day moving average (200 MA) waves aggravate its bearishness.
But the selloff has led to Bitcoin retesting oversold levels on the relative strength index (RSI) meter. RSI currently reads 35. Numbers below 50 hint at bullish resurgence and the reverse for RSI readings above 50.
For the bullish phase to resume, buyers would need to push the BTC/USD pair to the resistance near $53,000. A successful close above the said level would open the gates for the next leg of the rally.