US GDP Numbers Deliver Bitcoin (BTC) and the Cryptos a Perfect Storm

Key Insights:

• The US economy contracted by 0.9% in the second quarter aligned with sentiment rather than economists.
• Bitcoin (BTC) and the broader market responded accordingly, with the contraction laying off bets of another 75-basis point hike in September but affirming fears of a recession.
• EMAs turned bullish as Fed bets softened, supporting a possible BTC return to $25,000.

Following an 8.01% rally on Wednesday, bitcoin (BTC) was back on the move this morning.

At the time of writing, BTC was up 1.21% to $23,237.

A bullish start to the Thursday session saw BTC climb to a high of $23,431 before hitting reverse.

Market reaction to US GDP economic indicators delivered mixed results. BTC slid to a low of $22,600 before a return to $23,200 levels.

Despite the choppy morning, BTC steered clear of the Major Support and Resistance Levels.

Investors likely viewed the economic contraction as a reason for the Fed to take the foot off the gas, delivering the crypto market a perfect storm.

US Economy Contracts to Reaffirm Fears of an Economic Recession

In the second quarter, the US economy contracted by 0.9% versus a forecasted 0.5% expansion. The US economy contracted by 1.6% in the previous quarter.

According to the bea,

• A pickup in exports and a smaller decline in federal government spending provided support.
• However, decreases in private inventory investment, residential fixed investment, federal government spending, local government spending, and non-residential fixed investments hit the economy.

Investor jitters had weighed on appetite for riskier assets ahead of some dovish FOMC chatter ahead of the Fed blackout period.

The dovish chatter and concerns among FOMC members over the economic outlook suggested a possible 50-basis point hike. Despite the uncertainty over the July move, weak economic indicators did remove the chance of a 100-basis point hike.

While delivering a choppy response, it was an ideal outcome for BTC and the broader market. The Fed will need to temper its pace to return monetary policy to normalization and beyond, without crippling the economy.

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 0.81% to $23,161.

A mixed morning session saw BTC strike an early high of $23,431 before falling to a low of $22,600.

Despite the morning volatility, BTC left the Major Support and Resistance Levels untested.

Technical Indicators

BTC needs to avoid the $22,348 pivot to target the First Major Resistance Level (R1) at $23,647 and resistance at $24,000.

BTC would need a bullish session to support a breakout from the morning high of $23,431.

An extended rally would test the Second Major Resistance Level (R2) at $24,397 and resistance at $25,000. The Third Major Resistance Level (R3) sits at $26,451.

A fall through the pivot would bring the First Major Support Level (S1) at $21,591 into play.

Barring an extended sell-off, BTC should avoid sub-$21,000 and the Second Major Support Level (S2) at $20,295.

The Third Major Support Level (S3) sits at $18,243.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bullish signal. This morning, bitcoin sat above the 50-day EMA, currently at $22,151.

The 50-day crossed through the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, both bullish BTC price signals.

The bullish cross of the 50-day EMA through the 200-day EMA would support a run at $25,000. However, holding above the 50-day EMA would be the key to another extended rally.

Looking at the trends, BTC would need a move through the July high of $24,276 and $25,000 to target the June high of $31,956. A bullish cross of the 100-day EMA through the 200-day EMA would support a run at the June high.

From $31,200, BTC should have a clear run at the May high of $40,004.

For the bears, the June 18 low of $17,601 would be the next target, with a fall through the July low of $18,768 likely to test investor resilience. The bullish cross of the 50-day EMA through the 200-day EMA brings the July high into play.