31.08.202612:39 Forex Analysis & Reviews: Bitcoin seeks its legend

Price accounts for everything. Traders have learned this truth well. Bitcoin dropped below $80,000 after Fed Chair Kevin Warsh promised to bring inflation back to the 2% target, pushing Treasury yields up and cooling risk appetite. However, the sell-off was modest, not a reversal of the crypto market.

Kevin Warsh emphasized that financial conditions are not restrictive and that inflation clearly needs to move toward the Fed's target. This wording strengthens expectations for a prolonged tightening of monetary policy. Nevertheless, BTC/USD remains significantly above the levels at the beginning of the month, easily digesting the "hawkish" signal.

The crypto market still lacks clear directional bets after a short squeeze caused by a record liquidation of leveraged "bear" positions. According to Coinglass, open interest in Bitcoin futures has not recovered. In fact, the market is demonstrating a maturity that it lacked in previous cycles.

Traders are looking at long-term benchmarks. According to a study by Galaxy Digital, in four out of five completed "bear" markets, a breakout above the 50-week moving average signified the final formation of a bottom. Whether this is coincidence or a pattern will be revealed with time.

Dynamics of Bitcoin and Gold

One in the field is not a warrior. In the week leading up to August 28, $2.5 billion flowed into spot Bitcoin funds. This marks the largest inflow since October. Gold and other alternative assets also rose amid the so-called debasement trade. The essence of this trade is that investors are pricing in expectations of dollar depreciation due to rising budget deficits.

However, part of the movement is nothing but a flight to alternative assets amid concerns regarding US borrowing and the White House's policies. Statements from Treasury Secretary Scott Bessent deepened those concerns, although the cryptocurrency has already lost some of its gains, falling below $80,000.

Investor caution is justified. The October collapse, when Bitcoin fell more than 12% after Trump's tariff threats against China, showed how quickly beautiful narratives can fall apart. Meanwhile, gold continued its ascent toward historical highs, reaffirming its status as the main safe-haven asset.

Especially as the risks of escalating trade conflicts between the US, Canada, and China, compounded by tensions around Iran, are holding back BTC/USD "bulls."

Thus, Bitcoin is still searching for an established narrative that can demonstrate its fundamental value rather than its status as a speculative asset. The hunt has become more persistent since the token entered its "teenage years" and attracted the interest of institutional investors. Will it finally find its legend?

Technically, on the daily chart, BTC/USD is consolidating after a rapid rally. The catalyst for returning to longs will be breakouts above resistance levels at $79,450, $80,000, and $81,200.