After a week of downtrends, Bitcoin (BTC), now has hope for hodlers as it begins a new week.
BTC/USD finally found support after struggling for support all weekend and closed the week at $29900 — $450 more than last Sunday.
Bullish momentum continued, and the pair climbed through the night into June 6, achieving multi-day highs.
Bulls have been waiting for some relief from the price action, but Bitcoin is not yet out of the woods as Bitcoin begins what promises to be a fascinating trading week.
The culmination of these efforts will be the United States inflation data. This is a measure of global macroeconomic forces. The impact of anti-COVID policies and geopolitical tensions on supply shortages will become more evident as time passes.
As central bank monetary tightening continues to be seen as a way to press stocks and crypto alike, risk assets are still an unlikely investment.
Bitcoin’s network fundamentals continue to adapt to the environment and its impact on all network participants.
Cointelegraph looks at five things to keep in mind when charting the direction of BTC price movement in the next days.
BTC Weekly: Tenth Time’s the Charm
Although it took a while, Bitcoin finally posted a “green week” on the weekly chart.
BTC/USD spent a record nine week making lower weekly closes — a trend that began in March and was the longest in its history.
Bears were unable to hold the pair at $29,900 on June 5. This was approximately $450 more than the closing price the week before.
This event generated several hours of upside with local highs totaling 31,327 on Bitstamp as of the time of writing — Bitcoin’s best performance since June 1.
Trend Precognition issued a Long signal on #Bitcoin Weekly chart at the Weekly candle close. To confirm a breakout, look for a HH in the Weekly. Key MA’s should provide technical resistance if #BTC rallies. https://t.co/NPVL3D27C5 pic.twitter.com/GxwT5zI3gC
— Material Indicators (@MI_Algos) June 6, 2022
Some celebrated Bitcoin’s recent strength while others were more skeptical about the prospect of a larger rally.
Michael van de Poppe, a Cointelegraph contributor, noticed the open CME futures gap over the weekend. This offered a lure for a return of $29,000
He told his Twitter followers that he still expected this to happen on Bitcoin.
“A drop towards CME Gap at $29K would be a good idea before a quick reversal towards 31.5K.”
An examination of order book data confirms the friction that bulls will face in the event a continuation breakout. The area around $32,000 contained more than $60,000,000 in sell-side liquidity, just on Binance.
BTC/USD Order Book Data Chart (Binance). Source: Material Indicators
Il Capo of Crypto was also not a very optimistic account on Twitter.
This is in addition to the fact that prices are essentially ranging between 29k and 31k. This is below the main pivot (S/R Flip). -Every move up in price is corrective. Data shows that bulls have been trapped. Although we might see a scam pump of $30.7k-31.5k for the bulls, our main targets remain bearish. https://t.co/UnmENNNK6z
— il Capo Of Crypto (@CryptoCapo_) June 5, 2022
However, there was still optimism in the market.
IncomeSharks, a popular Twitter account, stated that a plan is better than guessing the right direction.
“I believe we drop before we go up. I will be waiting with bated breath if that happens. If stocks open up green, we could rally and I will pivot to alts in order to ride them up. For now, the TP level is at $34,000
Countdown to the U.S. CPI reado
The U.S. inflation rate is at its highest level since the 1980s. But will it continue to rise?
This week, the market will be able to find out as Consumer Price Index (CPI), data for May is released on June 10.
CPI prints are a benchmark for measuring inflation progress. They have always been accompanied with market volatility within and outside crypto.
Many are asking how high it can go, as the Russia-Ukraine conflict continues to impact global trade and supply chains.
Due to the soaring prices in the United States, interest rate hikes by the Federal Reserve are being scrutinized.
Stocks and other correlated crypto assets are facing a tough time after the end of “easy money”. This pain trend will not end soon regardless of inflation performance.
Bloomberg reports that liquidity is leaving the market, which means it will have an effect on equity markets,” Charu Chauana, market strategist at Saxo Capital Markets told Bloomberg.
“We expect that the drawdown on the equity markets will still have some room.”
Chanana spoke as Asian markets rallied during the week’s early trading. This was due to China loosening its most recent round of COVID-19 lockdowns.
At the time of writing, Shanghai Composite Index was up 1.1%. Hong Kong’s Hang Seng traded higher by more than 1.5%.
However, macro versus cryptocurrency is a different story than intraday data.
QCP Capital’s trading company, QCP Capital, believes that the U.S. M2 Money Supply contraction — its third in about twenty years — is another reason not to take any chances.
“This contraction of M2 is a result Fed hikes, forward guidance, which drove a surge reverse repos (RRP), to all-time records levels. In order to benefit from high overnight interest rates, banks and money market funds took money out of the financial system to deposit it with the Fed,” the Crypto Circular research series wrote.
“The upcoming QT balance sheets unwind will only exacerbate this draining liquidity, which begins 1 June. These factors will have a significant impact on crypto prices.
U.S. inflation data chart. Source: St. Louis Fed
Capitulation of miners “very close”
Despite lower prices threatening their cost base, Bitcoin miners have held off on distributing large quantities of coins despite this.
New analysis suggests that this could change soon, sparking the same trend that has historically accompanied generationsal BTC price bottoms.
Charles Edwards, the founder of Capriole crypto asset manager, tweeted a classic bottom signal from Bitcoin’s hash ribbons metrics.
Historical data shows that hash ribbons measure miner profitability. They are also able to correlate with price phases. He explained that the “capitulation phase” similar to March 2020 is currently underway. However, hodlers should not sell as a result.
“Hash Ribbon miner capitulation may be very near. Edwards stated that Bitcoin mining profit margins are being squeezed.
This is not a sell signal. The best long-term Bitcoin buys have been made at the end of capitulation periods.
Chart of Bitcoin hash ribbons Source: Charles Edwards/Twitter
Cointelegraph previously reported on the ongoing problems of miners, and this month, the State of New York has banned the practice.
Fundamentals echo miner tranquil
Fluctuations of miner participation will have an immediate effect on Bitcoin’s network difficulty and hash rate.
According to estimates, the hash rate has remained steady above 200 exahashes per seconds (EH/s) so far. This indicates that miners are still active and have not reduced activity due to cost concerns.
The data covering Bitcoin’s network difficulties also presents a calm, short-term picture.
Its upcoming automatic readjustment this Wednesday will show that difficulty will drop by less than 1 percent, reflecting the relative lack of upheaval within the mining sector.
The previous readjustment, two weeks earlier, saw a 4.3% decrease, marking the largest reversal in the past July 2021.
Chart showing difficulty estimations and bitcoin hash rate. Source: BTC.com
Some of Bitcoin’s most well-known commentators are optimistic beyond the short term.
Robert Breedlove, podcast host, noted that bitcoin was “now roughly 50% cheaper and 20% stronger than it was a year ago” in a Twitter debate. He argued that this demonstrated “mobilization”, which is the involvement of entrepreneurs in promoting Bitcoin’s growth.
Megawhales are a “promising sign”
Bitcoin’s largest investors may be leading the charge in putting their money where it is needed.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC. ADA. XLM. XMR. MANA.
Santiment, a sentiment monitoring company, noted that entities with 1,000 BTC or more now control more of the BTC supply. This is more than any time in the past year.
Santiment summarized the following on June 6: “The mega whale Bitcoin addresses, which are partially exchange addresses, have their highest supply $BTC per year.”
“We analyze 100 to 10k $BTC addresses frequently for alpha. However, accumulation from this higher tier can still be a promising indicator.”
Chart showing trends in bitcoin megawhale accumulation. Source: Santiment/ Twitter
CryptoQuant data meanwhile warns of fears that users may be sending large amounts of Bitcoin to exchanges for purchase. The trend of decreasing exchange reserves is continuing, with levels last seen in October 2018.
Bitcoin exchange reserves vs. BTC/USD chart. Source: CryptoQuantcom. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
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