Fed, Merge and $22K BTC – 5 things to know in Bitcoin this week
Bitcoin (BTC) starts a pivotal week on a solid footing as bulls successfully erase weeks of losses.
After closing the last weekly candle at $21,800, the highest since mid-August, BTC/USD is back on the radar as a long bet.
The end of an extended period of downside interspersed with sideways price action now appears to be over, with volatility expected to form a major theme in the coming days.
In fact, few weeks in Bitcoin’s history have been as hectic as this one is likely to be.
In addition to the Ethereum (ETH) rally on September 15, the US inflation trend will be examined on September 13 with the release of August Consumer Price Index (CPI) data. The recipe for unpredictability is there.
How will Bitcoin weather the storm? While the macro picture looks murky for risk assets as the US dollar rises, data from the chain continues to point to a price floor already in the making.
Additionally, Bitcoin’s underlying network is poised to hit new highs this week, underscoring miner resilience and recovery, along with conviction of profitability.
Cointelegraph takes a look at several of the key areas to watch as Bitcoin gives the ‘September Bear’ a run for its money.
Solid weekly proximity boosts short-term BTC bets
The recent weekly close provided some much-needed relief for Bitcoin bulls.
After several weeks of dismal performance, BTC/USD finally managed to seal a convincing week’s gains, even avoiding a last-minute correction in the candle, data from Cointelegraph Markets Pro and TradingView show.
As such, at just over $21,800, the September 11 event formed a solid foundation for a week of significant volatility.
At the time of writing, that level forms a consolidation zone, coinciding with an important trend line in the form of Bitcoin’s realized price. According to chain analysis firm Glassnode, this currently stands at approximately $21,770.
BTC/USD has yet to tackle more significant bear market levels that were lost as support last month, primarily the 200-week moving average, which is now near $23,330.
A peak to $22,350 on Bitstamp overnight nevertheless caught traders’ attention, fueling existing upside claims to continue.
“This was only preliminary supply of 22300,” the popular Crypto Twitter account Il Capo wrote in one of several recent updates.
“Still think 23k is likely. Then we’ll see reversal.”
ONE further tweet nevertheless warned that “major adversaries” are now coming in across Bitcoin and altcoins.
“In my opinion we see a final stage up of 5-7% soon, then ltf deployment, then nuke. Get ready,” it said.
As a sign of the upcoming volatility, fellow trader Cheds begins noted that Bitcoin marked its upper Bollinger Band on daily timeframes, the bands now slowly spread to make way for a wider trading range.
Inbound CPI combines with dollar decline
One of the two main talking points for the week in BTC price action comes from a familiar source: the US Federal Reserve.
CPI data is due for August, and hopes rest on the easing inflation trend continuing after July’s pressure showed a peak had formed.
Massive week coming;
– CPI data, which will most likely give a direction towards the FED.
– $ETH merger is approaching, which is one of the biggest events in blockchain in recent years.
– Climax on the strength of $DXY potentially approaching.
Fire.
— Michaël van de Poppe (@CryptoMichNL) 12 September 2022
Should that be the case, it would be a boon for risk assets that are suffering heavily at the hands of a rising US dollar.
According to the CME Group’s FedWatch Tool, it is still likely that the Fed’s Federal Open Markets Committee will table a repeat interest rate increase of 75 basis points at its September meeting next week.
For dollar watchers, however, there is already reason to believe that the return of risk assets should cement itself over the coming days.
Fresh off twenty-year highs, the US dollar index (DXY) has fallen nearly 2.7% in just four days.
My calculator cannot count the number of negative comments I received after tweeting $DXY Sell signal. pic.twitter.com/r4VlfIVvSR
— Trader_J (@Trader_Jibon) 12 September 2022
“One thing that makes me question my bias for Bitcoin and Crypto in general after the ETH merger is DXY,” analyst Mark Cullen, creator of trading resource AlphaBTC, revealed.
“We see potential for 3 stations [bear] divergence formed on the RSI and the September FOMC is next Wednesday. I wonder if we see $DXY break the parabola and push risk assets higher.”
Phoenix Copper CEO Donald Pond, meanwhile, called the USD and DXY chart “the most important thing out there.”
“The dollar is too strong an ATM, and has killed everything else,” he tweeted on the day.
“It has fallen rapidly in recent days but is still in a strong uptrend. No sustainable bounce for markets until the trend breaks.”
The merge is here!
Complementing the encouraging inflation data is a purely internal price trigger – the Ethereum rally, due around September 15th.
The event, which is now set to become a reality after months of uncertainty, sees Ethereum as a network transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) as its hashing algorithm.
Hype has built on social media and beyond, and now analysts are wondering what the immediate fallout will be — specifically, whether investors will “sell the news” and send markets lower immediately once the merger is complete.
Great week for #Ethereum and #Crypto community with the upcoming merger
These events tend to create more liquidity, which can be used to the whales’ advantage by engineering certain movements and appearances
Don’t rush into positions if you’re not already in one‼️
— Crypto Tony (@CryptoTony__) 12 September 2022
everyone larps whether to extend the merger or shorten the merger
feels like one of those games where the best move is not to play
— Udi Wertheimer (@udiWertheimer) 12 September 2022
In a dedicated update released on September 10, trading platform Decentrader stressed the need for caution and avoiding a “just up” mindset.
“It’s important to remember that there are several potential headwinds that could turn things in favor of the bears, namely errors in the Merge code, a significant portion of the Ethereum network moving to a fork that takes market cap with it, as well as macro headwinds from US August CPI data next week,” it wrote.
“It’s also important to remember that overall, macro and geopolitical systematic risks remain that could stop the most bullish narrative for ETH. Let’s see if the price can hold, post-consolidation.”
Decentrader drew comparisons to the hard forks of Bitcoin, which occurred in the second half of 2017 and later. Now and then, the risk of distraction remains.
“Long-term, the merger has fundamental changes that we interpret as bullish for Ethereum, but the actual event will undoubtedly prove volatile as the market breaks between narratives,” the update concluded.
“Be extremely careful with scams, fork tokens, etc. We’ve already seen several around the Merge and ETHPoW forks.”
ETH/USD was down for a second day in a row at the time of writing, eyeing $1,760 after reaching local highs of $1,790.
Difficulty, hash rate tackles all-time highs
Bitcoin’s fundamental network has been anything but bearish lately, and this week continues that trend to new highs.
Both Bitcoin’s mining difficulty and hash rate have either hit or are set to hit new records in the coming 48 hours starting on September 12.
According to estimates from monitoring resource BTC.com, the difficulty will increase by 3% at the next automatic readjustment, sending it further into uncharted territory with a total of 31.91 trillion.
It follows the previous jumbo adjustment of 9.26% two weeks ago, this represents the biggest increase since 2021, as well as acting as a clear signal that the mining competition is healthier than ever.
In fact, since their last “capitulation phase” ended last month, according to on-chain data, miners have been scrambling to add hashing power to their operations. This is exemplified by the hash rate – the estimated combined hashing power of the Bitcoin network – which itself has increased to levels never seen before in recent days.
According to MiningPoolStats, this spike came on September 5 and involved a brief trip to 298 exahashes per second (EH/s). The hash rate is currently just under 250 EH/s.
RespondingAnalytics platform TheTIE, meanwhile, noted that the increase in hash rate had moved the timing of the next Bitcoin block support halving event forward.
“As Bitcoin Hashrate rises to all-time highs, there is an important second-order effect to remember: The Halving. Before this it was expected for 2024, but now the projected date of the next $BTC halving has been moved to Q4’23,” commented it along with a hash rate chart.
Extreme fear turns out to be sticky
As bullish as the data and analysis appear to be, the overall crypto market still can’t quite shake the sense of foreboding.
Related: Crypto Traders Watch ATOM, APE, CHZ and QNT as Bitcoin Blinks Bottom
The Crypto Fear & Greed Index, after a brief flight higher, is back in “extreme fear” as of September 12 in a sign that a definitive trend change has yet to set in.
“Extreme fear” is where the index has spent much of 2022, including the longest consecutive stretch ever of over two months.
For Santiment, a platform dedicated to analyzing crypto sentiment, there was reason to be cautious thanks to the profit-taking activity on both Bitcoin and Ethereum.
“Bitcoin has climbed back above $22ki today for the first time in over 3 weeks,” it in summary.
“$BTC’s ratio of transactions in profit vs. loss is at its highest since March, and it seems that many have seen this mild rebuttal as the trigger to trade again.”
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
