Bitcoin (BTC), which is still in holiday mode, begins a new week with the United States financial markets closed for Independence Day.
As talk of lower levels continues to elude the largest cryptocurrency, it is still below the $20,000 mark.
Hodlers are stuck in a tight range after a quiet weekend. The prospect of a breakout to higher levels seems increasingly unlikely.
One analyst and trader has identified July 4 as the “wild run to downside” for crypto markets. The countdown is on for Bitcoin’s survival in the wake of the Federal Reserve rate hike.
What other surprises could the week bring? Cointelegraph looks at the market-moving factors that could be expected in the coming days.
BTC price bides its time over long weekend
Bitcoin came out of the weekend unscathed but there are still the classic pitfalls associated with off-peak trading.
The United States will not be returning to trading desks before July 5, but there is still plenty of opportunity for classic weekend price action.
The market has been stable so far in terms of volatility. With the exception of a short spike to $18,800 BTC/USD has remained within the $19,000 to $19,500 range for several days.
Data from TradingView and Cointelegraph Markets Pro showed that even the weekly close did not show any trend change. However, the psychologically significant $20,000 was unaffected.
BTC/USD 1-week candle chart (Bitstamp). Source: TradingView
“While below the range high, we can expect a fall down to $18,000,” Crypto Tony, a popular trading account, stated to his Twitter followers in a new update on July 4.
“It’s been a boring few days in markets. This is classic for a mid-range.”
Others continued to focus on the $16,000 area as targets for the downside.
The Orange MA was at the bottom in 2018. The Green MA was the Bottom in 2020. The Green MA (16-17K) is currently held. If it breaks then there is a Possibility of Next Bottom Blue MA (12-13K) $BTC pic.twitter.com/rZILTAOlXf
— July 3, 2022, Trader_J (@Trader_Jibon).
There was no significant Bitcoin futures gap, and there was flat performance on Asian markets. This meant that short-term price goals were not possible for traders.
After its recent retracement, the U.S. Dollar held near 20-year highs.
At the time of writing, the U.S. dollar-index (DXY), was above 105
U.S. dollar index (DXY), 1-hour candle chart Source: TradingView
Nearly “blast off” for gold against U.S. equity equities
Wall Street will be closed on Independence Day so U.S. equity can take a break Monday.
One chartist is however focusing his attention on the strength and value of stocks in comparison to gold in the current environment.
Patrick Karim, a gold monitor, stated that the precious metal was about to reach a historic “blast off” zone in a tweet thread.
After reaching a low point at the end 2021, the ratio gold to S&P has since recovered and is about to cross a threshold, which historically has led to significant upside.
“Gold is closing in on the ‘blast off’ zone compared to US equities. Karim said that previous take-offs had resulted in significant gains for Silver & Miners.
It is difficult to compare the situation in U.S. dollars terms. Since March, USD strength has kept XAU/USD at $2,000 below.
Silver fans will still reap the benefits of a modest increase in the XAU/SPX ratio.
You don’t have to go back to 2011 highs in #gold versus @spx to see MUCH higher nominal silver and miners prices. For a moment, think about this.
Patrick Karim (@badcharts1) July 3, 20,22
This forecast raises questions about Bitcoin’s ability break with macro trends. If Karim’s scenario is successful, a breakout against BTC would occur for gold. This would be due to the ongoing correlation with equities.
CRYPTOBIRB, a popular analyst and trader, summarized the weekend: “After escaping from the sideways pattern which had formed over a 1.5-year period,”
“Now, it is at 0.78 percent it remains strongly positive.”
Venturefounder, a fellow analyst, noted that Bitcoin is still tied to the Nasdaq’s moves.
While #Bitcoin is still in trend, #NASDAQ is also. Noting previous bottoms (Dec 2018 and Mar 2020), #BTC correlation was at its peak, it suggests that macro has always influenced BTC bottoms. It is more likely that macro will call bottom for BTC this time. pic.twitter.com/szmS4c6WV8
— venturef*undKsr (@venturefounder) June 26, 2022
Cointelegraph reported that Bitcoin’s inverse correlation has reached 17-month highs against the dollar.
Hayes’ “wild journey to the downside” is now crunch time
Apart from being Independence Day on July 4, one market player is watching it as a public holiday unlike any other — at least for Bitcoin.
Markets closed, and BTC price action already on the edge, Arthur Hayes, ex-CEO of BitMEX derivatives platform, has designated this long weekend as one day of reckoning in crypto markets.
This reasoning seems to be logical. The Federal Reserve raised key rates by 75 basis point at the end of June, creating fertile ground for risk assets to react negatively. Holiday trading that is low-liquidity and “out-of hours” increases volatility of prices. Hayes warned that the combination could prove potent.
“By June 30, (second quarter end), Fed will have enacted 75bps rate increases and begun shrinking its financial position. He wrote that July 4 falls on Monday and is a federal holiday.
“This is the ideal setup for another mega-crypto dump.”
Hayes claims that there are no signs yet of a “wild ride down the downside”, but they have been spotted so far. Since late last week, BTC/USD has been virtually static.
As traders and their capital will be returning, liquidity could be provided to stabilize the markets. Also, it may be possible to buy any coins that are going low in the event of an unexpected downturn.
Hayes stated that his previous forecasts of BTC/USD dropping to $27,000 and ETH/USD falling to $1,800 were “in tatters” by June.
The mining difficulty is still on the rise
Although there are concerns about miners’ ability and willingness to weather the current BTC price drop, Bitcoin’s fundamentals remain stable.
It is a testament to the determination of miners to remain on the network. The difficulty level at the next readjustment in this week’s is not expected to decrease.
After a slight decrease of 2.35% just two weeks ago, difficulty will not change much. This is because it automatically rises or falls to account for fluctuations in miner participation.
According to BTC.com’s on-chain monitoring resource, difficulty could even increase if current prices remain the same. This would add 0.5% to an already high metric.
Screenshot of the Bitcoin network basics overview. Source: BTC.com
If it comes to the miners themselves, opinions suggest that it is those who are less efficient — or newcomers with a higher cost base — who have been forced out.
Charles Edwards, CEO and asset manager Capriole, uploaded data to social media last week. It shows that the average production cost for miners is around $26,000. $16,000 of that is electricity. This means that overheads for miners directly impact their ability to reduce losses in the current environment.
Edwards stated that although we traded below Electrical Cost in June and the floor has since fallen as inefficient miners capitulate,”
Production cost chart for Bitcoin miners. Source: Charles Edwards/Twitter
Sea of Lows
The Bitcoin on-chain metrics that point to record overselling are not new in this year or the past weeks.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC. SHIB. MATIC. ATOM. APE.
This trend continues into July as the network revisits scenarios that were not possible since March 2020’s cross-market crash.
Glassnode, an on-chain analytics company, has found that the number of coins lost is at its highest level since July 2020. Glassnode examined the weekly average of unspent transaction outputs in loss.
Bitcoin UTXOs loss chart (7-day moving mean). Source: Glassnode
Similar to the previous two years, the profit percentage for UTXOs was just slightly below 72% in July 3.
Bitcoin % UTXOs profit chart (7-day moving mean) Source: Glassnode
Some of the silver linings that can be found in bear markets are welcome, even if they are rare. Bitcoin transaction fees were once very high during bullish periods with intense network activity. They are now at their lowest level since July 2020. Glassnode revealed that the median fee is $1.15.
Chart of the Bitcoin median transaction fees. Source: Glassnode
Cointelegraph reported that the same applies to Ethereum network gas prices.
com. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
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