After securing its highest weekly close since mid June, Bitcoin (BTC), enters the new week with a bang. Can the good times keep going?
BTC/USD was able to limit losses during the weekend and produce a solid green candle for weekly timeframes.
Bulls could have some time in what could be the last quiet week of summer due to the lack of major macro-market drivers that involve the United States Federal Reserve.
Bitcoin’s fundamentals are strong, despite an increase in mining difficulty for the second consecutive day in the next days.
Positive signs are also evident in derivatives markets. Higher price levels are accompanied by bullish sentiment.
Hodlers are now asking themselves how strong the rally is, and if it is simply a bullish countermove in a larger bear market.
Cointelegraph identifies five factors that could influence Bitcoin’s price this week.
After a multi-week high, Bitcoin embraces Volatility
The Aug. 14 weekly close of BTC/USD was at $24,300. This was the highest in two months.
The weekly chart continues to show a steady climb upwards after the June lows. Last week’s candle was around $1,100, or 4.8%.
A remarkable move by 2022. The gains sparked volatility overnight into Wall Street’s first trading day of the Week. BTC/USD continued to reach $25,200 on Wall Street before reversing under the weekly close level.
BTC/USD 1-week candle chart (Bitstamp). Source: TradingView
These moves have been common in recent days. This is not surprising for traders who tend to be cautious on shorter time frames.
“A new week starts, with bears stepping up so far to test some key levels,” Crypto Tony, a popular trading account, stated in part of his most recent Twitter update.
“We should again see an interesting week of price action. “Been everywhere in the shop in the lower time frames.”
According to Material Indicators, the likelihood of a downmove is clear if unpredictability continues to occur.
The close signaled “downward momentum” in the weekly chart, it said. Daily timeframes, however, were “flat” according to its proprietary trading tools.
Material Scientist, the creator of this bear rally, described it as the “final week” in his own comments.
Peter Schiff, a gold bug and a true believer in the possibility of $10,000 being on the cards, entertained a deeper correction.
This chart will help you to understand the impact of the #Bitcoin rally. This pattern is still very bearish. You have a double top as well as a head-and-shoulders top. Below the neckline, there is a rising wedge. Below $10K, minimum support will be tested. Keep an eye out for the following! pic.twitter.com/OHNhwsgxxs
— Peter Schiff (@PeterSchiff), August 14, 2022
Rekt Capital, a fellow analyst and trader, was more calm about the BTC price action on a longer-term.
He said that a spot price of less than $25,000 should be used to convert the dollar cost average (DCA), into Bitcoin. This is essentially buying a fixed amount for a period until the next block subsidy reduction event in 2024.
He told his Twitter followers that to succeed in Crypto you need a dollar cost averaging strategy and an investing thesis.
My DCA strategy is anything below $25000. My thesis is based upon the 2024 Halving Event Vision, which is Bull peak one year after Halving. Now, I am just patient.”
Macro is still at the “knife edge”.
The macro perspective of the next five trading days is remarkably calm after last week’s inflation print in the United States.
The Fed is not active, so market performance will be affected only by unanticipated events in Europe and Asia.
One analyst believes that the likelihood of crypto continuing to react to macro triggers other than inflation is lower than most people think.
DecenTrader Filbfilb, in a market update for his trading suite saw a decrease in correlation between BTC (and what he called “legacy” markets more generally.
He wrote that Bitcoin was showing a high correlation to legacy markets (see below, S&P500 in blue and NASDAQ in white). However, since reaching the latest bottom, all of their downside has been regained, and Bitcoin has not followed suit.”
BTC/USD vs. Nasdaq mini futures vs. S&P 500 mini futures chart. Source: TradingView
Filbfilb said that Bitcoin has not rallied as strongly since June’s $17600 lows. He also suggested that the spot price should be at least $30,000.
The root cause lies in the Terra-Celsius debacles. These two incidents create a perfect storm when combined with worries about inflation and the Fed’s response to it.
“What hasn’t changed is Bitcoin’s propensity for being at the mercy Fed’s policy to fight inflation. The most recent update highlighted that Bitcoin took a leap north with equities, thanks to better than expected inflation data on Wednesday.
“Moving forwards,” the CPI data, and following monetary policies decisions will continue to be crucial in determining what’s next.
Additional risk factors include geopolitical factors such as the Russia-Ukraine conflict and tensions over Taiwan. Filbfilb stated that the macro market situation remains at a “knife edge”.
China has announced a surprise rate cut to address disappointing economic data, breaking with the current trend.
“July’s economic data are very alarming,” Raymond Yeung (Greater China economist, Australia & New Zealand Banking Group Ltd) told Bloomberg in response to:
To stop further economic decline, authorities must provide full-fledged support for Covid policies and property.
Moskovski Capital CEO Lex Moskovski predicted that central banks would lower, not raise, interest rates.
He reacted by saying, “They all will pivot.”
Funding rates are stable despite running to $25,000
Looking at the effect of spot price action on trading behavior, it seems that there may be more upside.
Philip Swift, a developer at DecenTrader, and founder of the data resource Look Into Bitcoin, identified negative funding rates when analyzing derivatives markets.
Moderate negative rates often provide the foundation for further gains, indicating that traders are more convinced that there is a downside. Because the market expects negative and doesn’t overly bet upon gains, it allows for short positions to be “squeezed by” smarter money.
Bitcoin and crypto markets generally have a tendency to do the exact opposite of what is expected.
Swift said, “Interesting to observe Funding Rate dip negatively at times on the recent grind up for $BTC,” and uploaded a chart that shows price behavior during similar setups in past.
“Note how the price has risen after every occasion.”
Annotated chart of BTC/USD funding rates. Source: Philip Swift/Twitter
Data from the analytics resource Coinglass also showed that there was a lot of negative funding in the weeks following the June spot price lows.
Chart of BTC funding rates. Source: Coinglass
Difficulty as a result of a second consecutive increase
It is slow recovery for the Bitcoin network fundamentals and not a race to higher.
According to statistics resource BTC.com, miners are slowly returning to their historical activity levels.
After months of decline, the difficulty level is expected to rise for the second week at the automated readjustment scheduled this week.
Although modest, the 0.9% increase in competition between miners shows that prices are increasing. This is a relief for what has been a very pressured area of the Bitcoin ecosystem.
However, the hash rate estimates (an expression of the mining processing power) remain at 200 exahashes per minute (EH/s).
Screenshot of the Bitcoin network basics overview. Source: BTC.com
4 month highs in Crypto Fear & Greed Index
Although it may be pleasing to see a two-month high in Bitcoin spot price action, it is only one aspect of the market gaining back some serious ground this week.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC. ADA. UNI. LINK. CHZ.
According to the Crypto Fear & Greed Index sentiment gauge, crypto market participants are less afraid than ever since April.
According to the latest data, the Index, which calculates a score using a variety of mood factors, has retraced the losses caused by the Terra blowout.
This weekend, the score was 47/100. Its highest since April 6th, and it fell to 45/100 the following day.
This is because “fear” is the dominant market force. However, this number is far from the “extreme fear”, which lingered for a record time in 2022. Mid-June saw the Index score just 6/100.
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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