Bitcoin (BTC), which has just recovered from a multi-week low, begins a new week amid high levels of nervousness.
The largest cryptocurrency fell below $21,000 on the weekend. This is a clear sign of the fear in crypto markets.
Some call for new lows, while others warn of difficult months ahead. There is much for bulls to deal with in both the short and long-term.
This week’s United States Federal Reserve Annual Jackson Hole Symposium is scheduled. September, however, is due to be a bit of a showdown regarding inflation and related macro price triggers.
This could lead to volatility in risk assets during and before the market, which is something that weary investors won’t like after last week’s misfortunes on BTC/USD.
Related: Why the Bitcoin price bottom has not reached
However, miners are indicating that the worst is over with the hash rate beginning to recover from a rare “capitulation phase”.
Cointelegraph examines five important market topics that will impact Bitcoin traders over the next few days.
Jackson Hole: All eyes!
This week, the United States Federal Reserve is again in control of potential macro price triggers that could affect risk assets.
Fed officials and banking leaders from all over the globe will gather for the annual Jackson Hole symposium, which will take place on August 25-27, fresh from the Federal Open Markets Committee’s (FOMC) meeting.
The gathering this year comes at an important time for markets in the U.S. as well as further afield. While the Fed seems to have seen an increase in inflation, elsewhere the opposite is true.
Although the latest U.S. Inflation data are still weeks away from now, Fed Chair Jerome Powell might give strong hints about how the Fed will respond and his expectations for future economic policy.
This is because volatility could increase both before and after the event. Jackson Hole should be on traders’ radar.
“They are so focused upon doing this partly because they screwed over last year with that whole ‘transitory” thing. And they realize that the only thing they can now do is tighten their policy, which will slow inflation,” Kevin Cummins from NatWest Markets in Stamford, Connecticut told Bloomberg.
It remains to be seen if the market will favor another 75-basis point funds rate increase in September or gravitate towards a lower 50 percent raise.
Bank of America revealed that it will continue to seek 50bp rate increases in September and November as well as an additional 25bp rate increase in December in a preview of its Jackson Hole comments.
Rate increases are a headwind for risk assets and, in turn, present a challenge to Bitcoin and its attempt to avoid strong correlation with asset classes like U.S. equities.
Screenshot of the Fed funds rate chart Source: Federal Reserve
BTC for the “ugly” six-months
Bitcoin held off significant volatility this weekend, but saw a new low in August due to market movements accentuated by low-volume weekend trading conditions.
BTC/USD experienced a sudden drawdown on Aug. 19. The currency traded in a consolidation pattern for the next few days, which is continuing at the time this article was written.
The lowest point was reached by Bitstamp’s trip to $20,770. Bitcoin then added $1,000, and Bitcoin traded roughly in the middle between the two values.
Troublesome was the weekly close at $21,500. This is the lowest closing price since July 18, after the candle cost bulls nearly $3,000 (or 11.6%).
It feels like $BTC is about to drop below $20k. Do not be taken by surprise.
— Ben Armstrong (@Bitboy_Crypto) August 21, 2022
Others argued that the conditions did not point to more misery, despite commentators’ fear of a new low.
Michael van de Poppe (Cointelegraph contributor) believes that BTC/USD could cap any dip at CME futures closing from Aug. 19. This is around $21,200. He suggested that gains would be more difficult for most of the market due to the general bias towards downside entry.
He stated that markets would drop to $21.2K around CME Open, Friday’s close, and then everything will be fine.”
“We’ll see new lows even if we aren’t inclined to change. Panic is a result of Friday’s heavy correction and the overall period of accumulation. The upside is the pain.
BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView
Zooming out, Brian Beamish (founder of The Rational Trader education suite) left social media without any illusions about how 2022 will play out for Bitcoin.
A tweet said, “Next 12-19 weeks are gonna be ugly.”
“Once completed, the floor should be in for this cycle – then we will start it all over again.”
Beamish used the experience of two previous crypto bear markets to create a comparative price action chart that suggested that BTC/USD was not at its real macro low.
Matthew Hyland, an analyst, felt equally confident about a recovery over a longer time period and argued that traders shouldn’t lose heart.
“The Bitcoin structure in the next weeks/months should not be alarming. He summarized that either a higher low or double bottom or a cycle low will form.
“The end is coming.”
BTC/USD 1-week candle chart (Bitstamp). Source: TradingView
The hash ribbons indicate that miners are out of the capitulation phase
Miners are one group of participants in the Bitcoin network for whom an end to hard times is likely.
On-chain data shows that Bitcoin miners have escaped a capitulation period of over two months, despite the recent price drop.
According to the hash ribbons metrics, which use two moving averages for hash rate to determine trends in miner participation, there is a rebound.
This move was long anticipated. Blockware, a mining company, had predicted that the capitulation phase of hash ribbons would end this month or next.
Charles Edwards, CEO at asset manager Capriole, noted the latest shift and compared it with other years in Bitcoin’s history.
He wrote that the Bitcoin miner capitulation had officially ended today. It was also the longest capitulation in human history, at 71 days.
“This capitulation zone was two days longer than the 2021 one, and only two days less than the 2018 one where the price reached $3.1K.”
An analysis of hash rate estimates from the monitoring resource MiningPoolStats reveals that there was a recent increase in exahashes per minute (EH/s).
Edwards said, “Historically, Bitcoin’s miner capitulations have captured significant price lows and been great Buy-signals,” echoing the traditional Bitcoin market mantra “price follows ish rate.”
“Miner capitulations occurring late cycle (at minimum 2 years after halving and after tops) have been the most lucrative long-term signals (eg. 2012, 2015, 2018).”
Chart of Bitcoin hash ribbons Source: LookIntoBitcoin
Exchange balances hit new 4-year lows
Buyers are able to ignore price fluctuations in short time frames.
In the background, BTC exposure has been a source of concern for investors. They have been accumulating BTC in the market at an alarming rate over the past few days.
Data from CryptoQuant’s on-chain analytics platform CryptoQuant shows that the amount of Bitcoin available on 21 major exchanges fell from 2,342,662 BTC to 2303,727 BTC by Aug. 22.
Exchange users have thus removed more than 30,000 BTC in just four days.
Bitcoin exchange reserve chart. Source: CryptoQuant
Glassnode, a fellow data firm, said that the current total balance across all the exchanges it monitors had fallen to a new four-year low on August 22.
BTC/USD had climbed to $7,000 in August 2018. However, it was still several months away from its bear market bottom at $3,100.
Chart of the Bitcoin exchange balance. Source: Glassnode/ Twitter
In a single week, the sentiment gauge falls 40%
However, sentiment on crypto is now lower than it was before the price drop.
Related: These are 5 cryptocurrencies that have bullish setups and are poised for a breakout
Even though exchanges are seeing an increase in BTC being removed from their books, the overall picture regarding Bitcoin and altcoin investors is now one of fear.
The Crypto Fear & Greed Index uses a variety of factors to calculate a score for market sentiment and “extreme fear” can be found within a few steps.
The Index stands at 29/100. This is four points away from a return of its extreme fear bracket. It was 27/100 this weekend.
This represents a 40% drop in one week. Seven days before, the Index was at 45/100. It recorded its highest optimistic levels since April.
Screenshot of Crypto Fear and Greed Index Source: Alternative.mecom. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
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