Major Bitcoin Rally Could Be Just Around the Corner - but recession first?

With the U.S. stock market still dropping like a stone, the chances for Bitcoin to reverse its current downtrend are few. It appears that this could all be part of a major strategy by President Trump to lower inflation, and thereby rates, and so be able to refinance $9 trillion of US debt. Can Bitcoin survive this and even rally to a new high?

Trump prepared to let the stock market crash?

President Trump has always been the champion of the U.S. stock market. In his previous term in office he would often point to climbing U.S. stocks and give his view that this was a clear sign of a strong and growing U.S. economy.

It does now appear, at least for the short-term, that Trump has realised that a great way to bring inflation down would be to let the stock market crash. A falling stock market should certainly take the hot air out of the inflation balloon, deflating it enough that rates can come down, and the $9 trillion of debt maturing this year can be refinanced at much lower interest.

Method in the madness

It seems there could be method in the madness. From the very beginning of his presidency, Trump has talked about “short-term pain”. He is probably thinking that Biden’s previous “soft landing” strategy was just not going to work, and that a short, sharp, shock would achieve his ends far quicker.

A recession looks to be very much on the cards. In on Trump’s game plan, Elon Musk and DOGE are cutting government jobs massively, given that a large part of job creation has come within government over recent years, and a robust jobs figure has been a major factor in preventing a recession thus far.

Where does this leave Bitcoin

So where does this leave Bitcoin? History tells us that generally, Bitcoin will not rally when the stock market is falling, at least not for any extended period of time. That said, if Treasury Secretary Scott Bessent’s remarks are anything to go by, that he is “not concerned about a little volatility over three weeks”, the current crash may be just a very painful short-term event. With Bitcoin not far from retesting its hugely strong support base at $70,000, the rally could begin from there.

$BTC inverse head and shoulders pattern?

Source: TradingView

The short-term chart for $BTC shows that the series of lower highs and lower lows are still being made EXCEPT for the most recent correction, where a higher low has just been printed. Interestingly, this last low may turn out to be the right shoulder of an inverse head and shoulders pattern. If the price does break out here, and this pattern plays out, the measured move would take the price back to the top trendline of the wedge.

On the other hand, given the dismal state of the stock market, a rejection could certainly happen here. The price could then eventually go down to the major support band, from where a bottoming price action could occur.

A huge rally could be coming

Source: TradingView

The weekly chart displays how the $BTC price is being drawn down to the major support band. However, candle wicks to the downside show how buyers are coming in to push the price back up. 

The support here is massively strong. This level acted as resistance for a good part of the last bull market, and it took 8 months of this bull market before the price was finally able to punch through. 

At the bottom of the chart, the Relative Strength Index is foreshadowing a potential bounce. The indicator has come down to the very strong support level at 44.00, and should a bounce take place, this might be the first omen of a coming rally that could be tidal wave esque. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.