Bitcoin faces pullback risk as U.S. investor demand slows

Bitcoin is trading at around $118,815, showing modest daily gains, but on-chain and macro indicators suggest the market may be entering a more cautious phase.

According to a July 29 analysis from CryptoQuant contributor Arab Chain, the Coinbase Premium Index has turned negative for the first time in two months, indicating weaker demand from U.S. buyers compared to global counterparts.

The index tracks the difference in Bitcoin’s ( BTC ) price on Coinbase versus other exchanges. It typically reflects institutional and retail sentiment in the U.S. 

The index had been positive throughout most of the rally from sub-$105,000 levels, showing strong buying interest from U.S. institutions and retail traders. But that excitement has subsided as Bitcoin surpassed $118,000 in value. 

The diminishing premium implies that American customers are waiting for lower entry points and are less likely to enter at the current prices. This change in attitude is accompanied by a rise in exchange inflows.

Recently, over 30,000 BTC have entered trading platforms, suggesting that selling pressure might be intensifying. Declining demand in other significant regions, such as South Korea, further slows momentum.

Markets eye Fed meeting for rate guidance

The Federal Reserve’s July 30 policy decision is one impending event that could have an impact on Bitcoin. Although markets generally anticipate that the Fed will maintain interest rates between 4.25% and 4.50%, risk sentiment may be impacted by the tone of Chair Jerome Powell’s press conference.

A hawkish outlook would likely increase selling pressure, especially if there isn’t an obvious catalyst to prop up cryptocurrency demand. However, if there is any indication of dovishness or that rate cuts may begin in September, Bitcoin may increase in the near future.

Bitcoin technical analysis

With $119,500 serving as short-term resistance, Bitcoin is trading close to the top of its Bollinger Band range on the daily chart. The relative strength index is at 60, which is neutral but not overbought, and the 20-day moving average is serving as support.

Bitcoin daily chart. Credit: crypto.news

The MACD and awesome oscillator show weakening momentum, and the stochastic RSI is nearing oversold territory, suggesting a short-term bounce is possible if buying resumes.

Immediate support is at $118,000 while stronger support is found at $116,300.  A decline below these levels may pave the way for $112,000 or even $109,000. The price must break above $120,000 with strength to resume its upward trajectory.

However, in the absence of fresh interest from investors, Bitcoin might move sideways or undergo a more significant correction.