Bitcoin's Rally Stalls at Critical Hurdle

Bitcoin's recent rally has been impressive, with the cryptocurrency posting its best monthly performance of the year in August, gaining roughly 25% and breaking a seven-month range. This surge in value was mirrored by Bitcoin exchange-traded funds (ETFs), which recorded their strongest monthly inflows of the year, attracting over $3.5 billion in net inflows.

However, technical analysis suggests that Bitcoin still needs to clear one critical hurdle before a new bull market can be confirmed: breaking and holding above the May high. At the time of writing, Bitcoin traded around $77,250, having briefly fallen below $60,000 in early July.

The current setup invites comparison with the recovery from the 2023 bear-market bottom, but with a key difference: in 2023, Bitcoin had already broken above a major higher-time-frame high before reclaiming its 200-day moving average. Until Bitcoin clears the May high, the current structure could unfold as an inverse version of the 2023 pattern.

On-chain data and technical indicators are sending mixed signals, with a weekly bullish divergence resembling the signal seen near the 2022 bottom. However, those losses have not yet been widely realized, and past cycle bottoms were typically accompanied by a large-scale capitulation sell-off, which has not appeared so far.