Another red end of the week for Bitcoin, why a rebound is on the horizon

Bitcoin had been able to break out of its red streak earlier in the year after making 11 consecutive red weekly bars. With the market recovery, the digital asset had started to post some green weekly closes. That is until the market correction, and bitcoin lost about $4,000 from the peak of its value. This resulted in a weekly close for the previous week, and while it looked like a recovery might be on the horizon, bitcoin has recorded another red weekly close.

Two red shutters

Over the past couple of weeks, bitcoin had seen some incredible moves that had returned faith in the market. The cryptocurrency had risen as high as $25,200 before being knocked back down by the bears. Nevertheless, the cryptocurrency continues to maintain a strong bullish trend, but at a much lower price level.

Due to the pullback from $25,200, the digital asset had registered its second red close in a row. Two red weekly bars are no cause for alarm for a highly volatile digital asset like bitcoin, but it has often set a precedent in the past. An example of this is back in early April when the asset had seen two consecutive red weekly bars. It would go on to see another 9 red bars, the longest in the history of bitcoin.

But when we look at other times when the digital resource had seen such trends, it had not spent too long in it. An example of this is back in June when the market had fallen to $17,600. It was the second red weekly trend in a row, but the reversal was swift.

A Bitcoin Rebound in the Works?

One of the biggest threats to wealth is rising inflation. This primarily affects the purchasing power of the currency depending on how big the inflation rate is. The last three reports from the Fed have seen inflation rates reach the highest they have ever been in the last 40 years. This understandably triggered panic among investors.

With the rising inflation, more investors are moving to cryptocurrencies like bitcoin. This is because the digital asset has always been ahead of the rate of inflation. Where the inflation rate has reached as high as 9%, bitcoin had an annualized return of more than 200% last year. Given this, it is expected that more investors will move funds to the “digital gold.”

On-chain research firm Santiment has also revealed that it expects the digital asset to recover in the new week. This is because short positions on stock exchanges have increased following the drop in prices. With so many people betting against the market, it becomes an opportunity for investors to accumulate, and accumulation trends often precede sharp recoveries.

Bitcoin’s price is still holding up well. The digital asset had previously dipped below $21,000 on Sunday, but had recovered to trade above $21,200. Bitcoin is also showing meaningful support on the 4-hour chart ahead of the opening of the trading day. If it sustains support at $21,200, this will likely serve as a rejection point for the cryptocurrency.

Featured image from GoBanking Rates, chart from TradingView.com

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