Bitcoin (BTC), a cryptocurrency, enters a new week in question over its fate ahead of another important US monetary policy decision.
BTC/USD has been closing a very successful week — its highest close since mid-June — but is now more cautious as the Federal Reserve prepares for an increase in benchmark interest rates to combat inflation.
Many hoped the pair would exit its trading range and move higher, but the Fed’s weight is evident as the week begins, adding to the fragility of an already fragile risk asset market.
This fragility is also evident in Bitcoin’s network foundations, as miner strain becomes real, and the true cost to mining through the bear markets.
However, some indicators on the chain are showing encouraging signs, but long-term investors remain resistant to giving up.
Cointelegraph looks at the market’s potential movers for this week in a volatile week for crypto and equities.
Fed will decide next rate hike during “another fun week”
All things being equal, the story of the week is without doubt the Federal Reserve rate increase.
The Federal Open Markets Committee (FOMC), which meets on July 26-27, will decide the amount of the next interest rates move. This is expected to be 75 or 100 basis point.
As in many other jurisdictions, U.S. inflation is at its highest point in forty years. The rise seems to have taken the establishment by surprise, as calls for a peak are met w/ even greater gains.
William Clemente, Blockware’s lead insights analyst, summarized the following on July 25: “Should have been another fun one.”
The interest rate decision will be made July 27th at 2pm Eastern Time. This is a date that could lead to increased volatility in risk assets.
One analyst suggested that this could be exacerbated by low summer liquidity and lack of buyer conviction.
“Entering ECB/FOMC/Tech earnings amid the lowest liquidity year. The market is back to being overbought. “Bulls, let it Ride,” Mac10 tweeted.
Previous posts also highlighted Q2 earnings reports that could be contributing to a decrease in the stock price, as per previous behavior.
Two major crashes in 2022 were caused by Tech Earnings, FOMC and Tech Earnings. “This time will be different” pic.twitter.com/XgS1dDOLce
— July 22, 2022, Mac10 (@SuburbanDrone).
Tedtalksmacro, a fellow analyst, said that “BTC and risk assets have pumped more on FOMC events this past year, only for them to sell off afterwards, is this the new normal?”
“The US Federal Reserve gave a 75bps increase at its June FOMC meeting – the largest increase since 1994. Before inflation is normalized, more substantial hikes can be expected.
Even before events start unfolding, the week already feels different. Asian markets are flat compared to last week’s bullish tone. This was accompanied by a rebound across Bitcoin and other altcoins.
One argument is that the Fed can’t raise rates further without destroying the economy. Tedtalksmacro, however, pointed out the importance of the employment market to keep hikes coming.
He said that Bitcoin will not be able to move beyond 28k until the data deteriorates.
Spot price fails key moving average
According to data from TradingView and Cointelegraph Markets Pro, Bitcoin’s most recent weekly close was a “halfway house” for bulls.
Although BTC/USD achieved its best performance in more than a month, it missed out on the 200-week moving average (MA), at $22,800.
BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView
Bitcoin fell to the bottom of its most recent trading range after the close at $22,500. Bitcoin is still below $22,000 as of this writing
Good morning legends Range high dump in the overnight session on $ETH or $BTC We can have $1460 on $ETH, and $21,700 for $BTC. Chart updates to follow.
— July 25, 2022, Crypto Tony (@CryptoTony__).
“Observing if we find support at $21,666 vertical. In his most recent update, popular trader Anbessa said Patience to Twitter followers.
Crypto Chase, a fellow account holder, suggested that there would be modest upside if the MA was reverted to 200 weeks.
“Chopping around in the Daily S/R red box with an inability 22.8K (Daily resist) to support. He wrote that he had made multiple attempts, but failed so far.
“If the price rises and is accepted, I will watch 22.8K as support for potential long-term entry to 23.2K.”
In a later update, $21,200 was identified as a possible bearish target. This also forms a support/resistance level in the daily chart.
Bitcoin is still at $21,900 but it’s $1,200 more than it was a week ago.
BTC/USD 1-week Candle Chart (Bitstamp), with 200-week MA. Source: TradingView
The latest price action did not change long-term opinions. Venturefounder, who is a contributor to CryptoQuant’s on-chain analytics firm CryptoQuant said that a macro bottom had yet to emerge, potentially as low as $14,000.
“In line with past halving cycles this is still my most valid forecast for Bitcoin before the next halving: BTC to capitulate within the next 6 months and hit cycle bottom (anywhere from $14-21k), then chop around into $28-40k most of 2023, and be at $40k again in the next halving,” an original June forecast was retweeted.
March levels of difficulty –
As a sign that the troubles of miners due to price weakness might only be just beginning, there is currently upheaval across the Bitcoin network.
The measure of competition among miners that adjusts to participation has been falling since June, and it is back at levels not seen in March.
This adjustment, which slashed 5% from the difficulty total and signaled a shift in miner activity, was especially noticeable. This was the biggest single drop since May 2021. The next adjustment, which is due in ten more days, will likely reduce difficulty by another 2%.
The most crucial aspect of the Bitcoin network is its difficulty adjustments. They help to create a level playing field and encourage recovery. Due to less competition, mining Bitcoin is easier or less difficult if the difficulty is lower.
Data shows that the need to remain afloat is a constant concern for miners. CryptoQuant reports that miners sent 909 BTC on July 24, the highest amount in a single day since June 22, and with a 5% difficulty drop.
This week, however, is not likely to see a turnaround in the mining industry.
Screenshot of the Bitcoin network basics overview. Source: BTC.com
Cointelegraph also reported that miners are not being able to make ends meet under current conditions due to the BTC price.
We are very proud of the MVRVZ score
Bitcoin’s most popular on-chain indicator has just reached what is probably its highest level, zero.
After a short week of highs, Bitcoin’s MVRVZ Score fell back to negative territory on July 25th. This was the same zone that is reserved for macro-price bottoms.
#Bitcoin $BTC VZ-Score just passed 0. Before: 0.010 -> Now: -0.000 View metric:https://t.co/IBVIM3J84o pic.twitter.com/DRGqIxKW7w
July 25, 2022 — Glassnode Alerts (@glassnodealerts).
MVRVZ is a graph that shows BTC’s overbought and oversold relative to “fair Value” and is very popular due to its ability to determine price floors.
The return of it could indicate a new period of price pressure as accuracy in catching bottoms is limited to a two-week margin.
Cointelegraph reported at the beginning of July that MVRVZ gave a worst-case scenario of $15,000.00 for Bitcoin/USD.
From four-month highs, sentiment drops
If sentiment data is to believed, the crypto market’s past week could have been a brief time of irrational exuberance.
Related: Top 5 cryptocurrencies you should be watching this week: BTC. ETH. BCH. AXS. EOS
The Crypto Fear and Greed Index’s latest data shows a steady decline in market sentiment from April, which was the highest since April.
The Index is at 30/100 as of July 25 — still “fear” driving mood overall, but five points higher than the “extreme fear bracket” in which the market spent a record 73 consecutive days.
Despite this, Sentiment has made a remarkable comeback since June when Fear & Greed reached some of its lowest levels ever at 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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