Bitcoin Stalls Below $121.5K as Bears Regain Control

The BTCUSD pair has been showing lackluster performance, with the price action down nearly 2% since the start of the month.

Earlier, Bitcoin gained 4.1% from August 4 to 10, then briefly tested an ATH of $123.7K on Binance on August 14 before reversing downward.

The price dipped 1.3% from August 11 to 17 and has sagged over 3% since Monday’s open.

US Treasury Secretary Scott Bessent confirmed in an interview with Fox Business that the federal government has no plans to purchase cryptocurrency for its reserve.

To remind, the establishment of the Strategic Bitcoin Reserve in March lead markets to anticipate increased demand for the cryptocurrency, but those expectations have not materialized.

The White House said it will use only confiscated tokens, the value of which is estimated by Bessent at $15-20 bn.

Policy and Inflation: Macro Headwinds for Crypto

Adding to Bitcoin’s headwinds, the Producer Price Index (PPI) for July came in at 0.9% m-o-m and 3.3% y-o-y, significantly outpacing forecasts of 0.2% and 2.5%, respectively.

Rising inflationary pressure cast doubt on the Federal Reserve’s next steps, reducing the likelihood of a 25-bp rate cut at the September meeting.

Consequently, markets have reverted to risk-off mode.

Jackson Hole: Market Volatility Ahead

The annual Jackson Hole economic symposium will take place over the coming days, featuring a speech by Fed Chair Jerome Powell.

Heightened market volatility could be in the cards amid a news flow from Jackson Hole.

Key Levels to Watch: $121.5K Resistance and $112K Support

Our previous technical analysis highlighted a key resistance level for BTCUSD at $121.5K, noting that the bulls would need not only to break through but also secure a foothold above this level.

This scenario failed to play out, and the bears may now seize their opportunity.

A breakdown within the $100K-105K range could signal a downward reversal, though it is too soon to price in this outcome.

For the time being, the daily timeframe shows that Bitcoin trades near its immediate support line, implying a potential upturn.

To recap, the optimistic scenario of breaking through $121.5K did not materialize, prompting a pullback.

If this downward momentum gains traction, we may have to revisit bullish scenarios and signal that the market faces a prolonged downturn.

Short term, Bitcoin still holds some upside potential if the bulls can stage a rebound from the $112K support line.