Bitcoin hits $ 45,000 ahead of July inflation report, but a fractal indicates an impending correction

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Bitcoin (BTC) hit its highest level in more than two months, just a few days left until the July inflation report.

The top cryptocurrency climbed 1.65% to $ 45,363 on August 8, continuing the upward momentum that jumped 21.62% from its August 5 low of $ 37,300.

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BTC / USD daily chart. Source: TradingView.com

Momentum was also strong among Bitcoin rivals. Ether (ETH), the second largest cryptocurrency by market capitalization, rose 29.78% from its August 3 low of $ 2,630 and topped $ 3,100 on Sunday. Its gains came after Ethereum’s London hard fork went live on August 5th, which should add deflationary pressures on the ETH offering.

July inflation report, on-chain

On Wednesday, August 11th, the US Bureau of Labor Statistics will release its July inflation report, with markets forecasting a 0.5% increase. The forecasts come after the consumer price index (CPI) rose to 5.4% yoy in June, the largest increase in 13 years.

Bitcoin bulls have reacted positively to recent inflation reports. They effectively protected the cryptocurrency from falling below $ 30,000 after the May 19 crash. Meanwhile, their recent efforts to push prices past $ 40,000, which eventually resulted in a slow upward break above $ 45,000, suggest strong demand for Bitcoin appearing to break out of its summer lows.

Lex Moskovski, Chief Investment Officer at Moskovski Capital, highlighted a Glassnode chart that showed dramatic increases in companies entering the Bitcoin network, offsetting growth with the rise in BTC / USD rates.

Bitcoin Entities Net Growth Chart. Source: Glassnode

“The number of new Bitcoin units continues to reach an all-time high,” tweeted Moskovski.

Additionally, on-chain analyst Willy Woo said Bitcoin’s continued momentum should push its prices above $ 50,000, citing the imbalance between supply and demand in the market. He said all investor cohorts were buying bitcoin, causing a supply shock.

Related: This is what traders expect now when the Ethereum price is above $ 3,000

Woo referred to a chart he posted on July 15 when the Bitcoin market corrected lower after hitting its high at $ 36,675. The graph below shows Bitcoin liquidity shock events on all exchanges and their relationship to prices.

Woo stated:

“Fundamentals don’t predict short-term price, but when you have enough time, pricing reverts to fundamentals. [The] The exact value today is $ 53.2,000 with a standard deviation band between $ 39.6,000 and $ 66.8 (68.5% confidence). “

Bearish fractal

However, the recent Bitcoin surge carries the risk of becoming a dead hop based on previous top-to-bottom Fibonacci retracement fractals.

Bitcoin Fib retracement from local highs to the 200-week EMA. Source: TradingView.com

After making record highs, Bitcoin tends to correct towards its 200-week exponential moving average (200-week EMA; the yellow wave) where it eventually bottom to pursue another upward cycle.

In the last two events, the BTC / USD exchange rate saw fake recovery rallies after testing the 23.6 Fib line as support. Those up moves failed to turn into big bullish moments after encountering resistance at higher Fib levels.

Related: 3 Reasons Ethereum Probably Won’t Flip Bitcoin Anytime soon

For example, Bitcoin rebounded more than 50% in 2019 after bouncing off its 23.6 fib line near $ 7,357. But the cryptocurrency has faced extreme selling pressure near its 61.8 Fib line of $ 10,613. Eventually it continued its downtrend, plummeting as low as $ 3,858 in March 2020.

If the fractal repeats itself, Bitcoin could encounter extreme resistance at the 61.8 Fib level at $ 46,792 and correct downward to retest its 200-day EMA, which is currently below $ 20,000.

Independent market commentator and trader Keith Wareing suggested that an impending bullish transition between Bitcoin’s two weekly moving averages indicates the beginning of a multi-month bull run. The indicator known as MACD was instrumental in predicting the 2020 bull run.

Bitcoin Prices and MACD Crossovers in Recent History. Source: TradingView.com

“The weekly MACD will turn bullish on Bitcoin after close of trading tonight,” Wareing told his followers, with Bitcoin’s price above $ 44,500 at the time of writing.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.