Major cryptocurrencies are displaying bullish signals, with bitcoin, currently at $114,137.99, showing a classic inverse head-and-shoulders breakout that could push its price toward the $120,000 mark. However, there is a significant concern regarding the broader market conditions, particularly as the daily chart for the S&P 500 E-Mini futures reveals a bearish pattern that could lead to a sell-off. This potential downturn in the S&P 500 could adversely affect the cryptocurrency market and place bullish investors in a precarious position.
Since August 1, E-mini futures have surged nearly 5%, achieving a record high of $6,542. This steady increase has formed a rising wedge pattern characterized by converging trendlines that connect the highs and lows of various days. The convergence of these trendlines suggests that bullish momentum is dwindling, increasing the likelihood of a market pullback. Experts cited the rising wedge pattern as a bearish reversal indicator, warning that it greatly amplifies the chances of a sharp decline and signifies that the upward rally may be losing steam.
Cryptocurrencies typically align closely with the sentiment of Wall Street, indicating that any decline in the S&P 500 could negatively impact bitcoin and other altcoins. The situation could worsen if the upcoming U.S. consumer price index (CPI) report, expected Thursday, shows hotter-than-anticipated inflation. Such news, coupled with signs of weakness in the labor market, could spark renewed fears of stagflation—a serious risk for risk assets, including cryptocurrencies.
Recent forecasts estimate a year-over-year CPI increase of 2.9% for August 2025, the highest annual rise since January of that year, surpassing the Federal Reserve’s target of 2%. This estimate would also exceed the trailing twelve-month average inflation rate of 2.6%. The core CPI, which excludes food and energy prices, is projected to rise by 3.1%.
In the options market, data reveals a bearish bias for bitcoin (BTC) and ether (ETH). The 25-delta risk reversals for both assets indicate that short and near-dated puts are trading at a premium over calls, reflecting a preference for protection against potential declines. This put bias is thought to be driven by institutional investors seeking long-term hedges, with trading volumes also trending downward in over-the-counter markets.
While bitcoin’s bullish breakout might suggest a strong uptick, XRP appears to be in a state of indecision, evidenced by its restricted movement within a descending triangle. This pattern, combined with its position within the Ichimoku cloud, indicates a time of consolidation, with a potential breakout aimed at the previous high of $3.38 from August 8. However, the downward-sloping trendline suggests continued selling pressure.
Conversely, Dogecoin (DOGE) has regained its bullish trendline from June lows and has moved above the Ichimoku cloud, suggesting it may test the July high of 28.76 cents. Despite this positive momentum for DOGE, traders remain cautious regarding the risk posed by a rising wedge breakdown in the S&P 500 futures, which could hinder DOGE’s growth and impact its price rhythm negatively.
