Bitcoin (BTC), which began the second week in April, is a whine as bulls struggle for support above $40,000.
After a weekend of refreshingly low volatility, the market nerves returned to normal and BTC/USD dropped in the closing hours of Sunday.
The average hodler feels like they are caught between two tables. While macro forces promise major trends shifts, but are slow to manifest, “serious buyer demand” is absent from cryptoassets.
However, insiders are positive about the future as demonstrated by the all-time high Bitcoin network fundamentals, and other indicators.
Combining these two opposing factors results in price action that doesn’t seem to know where it is going next. What is the likelihood of something changing in the next week?
Cointelegraph examines five possible Bitcoin price cues, as $40,000 is closer.
BTC has not experienced a “massive drawdown”.
Monday starts with a reclaim for $42,000 BTC/USD. The pair briefly lost overnight and fell into the weekly close.
Bitcoin hit $41,771 via Bitstamp, matching its March 23 levels.
BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView
The largest cryptocurrency also lost all its gains over the past month to return to the top end of its trading range. However, this could be a retesting of the previous resistance as support. Many traders, however, are optimistic that a reversal will soon occur.
“Bullish test of flipped weekly levels, finex whale filling bidding, I’m purchasing the dip. Credible Crypto, a popular Twitter user wrote that you don’t have to wait until confirmation.
Credible Crypto commented on Bitfinex’s whale buying as well as new chart data that shows that Bitcoin’s Aroon indicator is turning bullish in recent times.
Aroon is a tool that detects uptrends and downtrends in assets. Since 2017, when Bitcoin crashed, Aroon only has delivered bearish-tobullish “crosses,” six times.
If you ask me, these are pretty good odds. Aroon’s behavior towards time rather than price makes it an exponential indicator as well as a smooth one. I don’t expect a huge drawdown.
— Otsu (@OtsukimiCrypto) April 11, 2022
Cointelegraph reported that Rekt Capital, a trader and analyst, had many reasons to believe in Bitcoin bullishness, but the weekly close at $42,150 disappointed him compared to his $43,100.
He explained that a BTC Weekly Candle Close such as this would result in a retest of $43.100 to support new support.
According to the blue circle, BTC is in a position to move higher within the $43100-$52000 range.
Michael van de Poppe, a Cointelegraph contributor, noted that there was no longer a possibility for CME futures gaps to offer a short-term price target before Monday trading.
Stocks under pressure across the board
Stocks are facing a dark day as Asia is leading the pack with large losses due to China’s recent Coronavirus lockdowns.
Morning trading saw a drop of over 2% for both the Shanghai Composite Index (SCI) and Hong Kong’s Hang Seng (HSG).
Europe’s markets had not yet opened at the time this article was written, but ongoing geopolitical tensions centered on Russia showed no sign of improvement.
One ray of hope for the euro was provided by Emmanuel Macron, the incumbent French President, and Jean-Marie Le Pen, the far-right rival in polls.
Analysts are also focusing on worrying trends beyond the immediate: rapid inflation, loss of bond markets and an apparent inability by central banks to react.
This week, the European Central Bank (ECB), will meet with a focus on inflation control — ending asset purchase and raising interest rates.
After the Fed’s rate-hike cycle began, the largest bond bubble in 800 years continues to collapse. This is ahead of next week’s #ECB meeting & rising #inflation shaking up bond mkts. Global bonds’ value has fallen by $960bn more this week, bringing the total loss to $6tn. pic.twitter.com/g78Pu2dyLo
— Holger Zschaepitz (@Schuldensuehner) April 10, 2022
This situation highlights the problems faced by stocks in today’s economic climate. Commentators are unanimous in their belief that Bitcoin and crypto will be less popular due to the current inflationary environment.
Holger Zschaepitz, in a tweet last week, revealed that despite the gains in S&P 500, the Fed’s asset purchase means that progress has actually been flat since the Global Financial Crisis.
He wrote, “Just to be clear: While the S&P 500 may be at a new ATH today (or in relation to Fed’s balance sheet), it is trading at the exact same level in 2008 so equities are trading sideways since 2008, effectively counteracting the balance sheet expansion.”
Arthur Hayes, former CEO of BitMEX derivatives giant BitMEX believes that Bitcoin is still a safe place to store value in the face fiat failure.
Problem is, such a scenario doesn’t exist yet.
Hayes reiterated in his Monday blog post that pain will precede gain for investors with high risk assets.
Future trends could see the U.S. dollar losing its hegemony in favor of other assets by nations and individuals, but crypto will still be impacted by macro forces.
Crypto’s growing correlation to central banks is a sign that stocks will fall as they act to combat inflation.
“The short-term (10 day) correlation is high and the medium-term (30-day and 90–day) correlations move up and to the left. Hayes argued against crypto correlations with the Nasdaq 100.
“To support selling fiat and buying cryptocurrency in advance of an NDX meltingdown (30% to 50% drawdown), I need correlations across all time periods to trend demonstratively lower.”
Can equities see their value reduced by the Fed and its actions, or is it just a rumor? Hayes stated that it would be anybody’s guess.
“Down 30%? “Down 30%? He said, “Your guess is as good or better than mine.”
“But let’s not forget that the Fed doesn’t plan to increase its balance sheet anytime soon. This means that equities aren’t going higher.”
Screenshot of the Federal Reserve balance sheet as at April 4, (screenshot). Source: Federal Reserve
Traditional markets are not as supportive of sentiments
It is not surprising that market sentiment is suffering from the macro gloom.
The Crypto Fear & Greed Index has returned to “fear” territory after sensing “greed” in crypto at the end March.
The metric is an analog to the traditional market Fear & Greed Index. It has lost half of its normalized score in less than two weeks due to cold feet returning traders.
On Monday, Crypto Fear & Greed was at 32/100. Its traditional counterpart, 46/100, was considered “neutral.”
Van de Poppe reminded readers that they should not trade on the basis of sentiment cues, whether it is deserving or not.
He summarized, “Everyone was very bullish about the markets, but now they start to correct and the fear takes control.”
“The sentiment is not a good indicator of how you should trade often.”
Screenshot: Crypto Fear and Greed Index Source: Alternative.me
Faith is rooted in the fundamentals
There is a glimmer for hope in a familiar source this week: despite all the price declines, Bitcoin’s network difficulty will only decrease by 0.4% over the next few days.
Similar: Top 5 cryptocurrencies you should be watching this week: BTC and NEAR, FTT, ETC and XMR
The most crucial aspect of Bitcoin’s self-maintenance paradigm is difficulty. It will decrease from its all-time highs in order to reflect changes made in the mining composition.
This adjustment is small in size and suggests that miners are still financially healthy at current levels, despite the 10% BTC/USD drop last week.
Average chart for Bitcoin difficulty over 7 days. Source: Blockchain
Additional data supports this argument. The hash rate estimates for monitoring resource MiningPolStats are also at record highs.
Cointelegraph reported that mining continues to be a major source of investment. Blockstream announced last week that it will build a solar-powered mine capable of producing 30 petahashes per sec in hash rate.
Bitcoin estimated hash rate chart (screenshot). Source: MiningPoolStatscom. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
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