“Biggest week of the year” – 5 things to know in Bitcoin this week
Bitcoin (BTC) starts one of the most important macro weeks of the year in a precarious position below $17,000.
After the last weekly close, BTC/USD showed little upward momentum before the December 12 Wall Street open.
With volatility yet to show, the largest cryptocurrency continues to trade in a narrow range and analysts are increasingly impatient for new catalysts.
These, they agree, should come in the next few days – US economic data is ready, and its content and impact on economic policy is likely to have a significant impact on crypto markets.
Elsewhere, the troubled status quo continues – Bitcoin miners struggle, sentiment lacks inspiration and traders increasingly draw comparisons to the pits of past bear markets.
Where could BTC price action be headed in the coming week? Cointelegraph takes a look at five factors set to influence the trajectory.
“Most important” CPI print forms key focus
The expression on everyone’s lips this week is the Consumer Price Index (CPI) – the key measure of consumer price growth in the US
While it comes every month, the latest CPI print, coming on December 13 for the month of November, has additional significance for the market. With two weeks left until the end of the year, for example, the chances of a risky “Santa rally” hang in the balance.
It’s not just the CPI report itself; The Federal Reserve’s Federal Open Market Committee (FOMC) will decide on rate hikes this week, and Chairman Jerome Powell will deliver a speech that market commentators will be scrutinizing for signs of policy changes.
“CPI report Tuesday, FED rate hikes and JPow talk on Wednesday. Watch for volatility,” On-chain analytics resource Material Indicators in summary in the weekend.
Popular trader MisterSpread added that additional decisions outside the US made for “one of the most important (if not the most important)” weeks of the year.
“Tuesday’s CPI will once again be ‘the most important CPI release ever,’ this time because the market has set it up to be with its epic 2-month short squeeze rally,” trading firm QCP Capital meanwhile wrote in a market update.
QCP continued:
“A higher-than-expected CPI print and more hawkish Fed has the potential to invalidate this rally, as we saw in the April and August reversals. On the other hand, another disinflationary push could see many chasing a continuation of the rally into the end of the year .”
Regardless of whether it is up or down, the CPI tends to induce market volatility around the release, and calm returns only after the price decision Powell’s accompanying speech.
According to CME Group’s FedWatch Tool, current consensus calls for a smaller rate hike of 50 basis points this month, signaling a fall for the Fed in what could yet prove to be a significant turning point in policy.
At the time of writing, the probability of 50 basis points was around 75%.
Financial commentary resource The Kobeissi Letter, which also describes this week as the “biggest week of the year”, still had a warning for investors.
“Imagine the madness if the Fed doesn’t budge or November CPI is above October’s 7.7% print,” part of a Dec. 8 tweet read.
“This is why you don’t want a Fed-controlled market.”
BTC spot price pending action
With everyone focused on the Fed, traders understand that policy and macro numbers will de facto dictate what happens to BTC/USD in the coming days.
Apart from force majeure, there may be little else to do but sit and wait for data to roll in.
Meanwhile, BTC/USD continues to fluctuate in all-too-familiar territory around the $17,000 mark, data from Cointelegraph Markets Pro and TradingView shows.
Unchanged for days, the pair seems directionless as the dust from the FTX implosion continues to settle.
“BTC has bounced between realized price (green) and balanced price (yellow) since June,” analytics resource On-Chain College in summary on the medium-term trend.
“I’m interested in a sustained movement outside of this area, which hasn’t happened yet.”
Some had more categorical views on BTC price performance. Matthew Dixon, founder and CEO of crypto valuation platform Evai, called for Bitcoin to “complete the overall correction higher” to cancel out most of the losses from FTX.
At the same time popular commentator Profit Blue maintained that $10,000 would re-enter the radar before the start of 2023.
“Bitcoin is heading to $10k and it will likely bottom out there soon. Pay attention to the details,” read the comment on an associated chat.
US dollar teases renewed strength
Pending a trend change for the US dollar, trader Bluntz, meanwhile, warned that Bitcoin could yet deliver a bearish end to the year.
The US dollar index (DXY), under pressure for several weeks, has begun to seal higher lows on daily time frames, potentially setting up dollar strength for a rally.
This, thanks to inverse correlation, would spell trouble for crypto markets across the board.
“pretty ugly 4hrs closing here, looks like a lower high on the 4hr time frame and lots of catalysts coming this week,” Bluntz wrote in a Twitter update a day.
“dxy is also posting a higher low on daily and looking strong. my gut is telling me we are headed for a new low sub 15k for btc which I will happily buy.”
An earlier post from December 5 called for reaching the $15,000 zone in Q1 next year.
Fellow trader Doctor Profit, meanwhile, noted that DXY had returned to a key “breakout” zone from June, and that short-term signals should therefore be decisive for the path.
“DXY retested the June breakout for the first time,” he tired last week.
“The mother of all decisions is coming, expect big volatility next week. The incoming DXY move will decide the fate of the crypto and stock market.”
DXY has yet to regain its 200-day moving average (MA), but the loss of this was recently described as “lights out” for the dollar.
Supply shock conditions near 10-year high
Behind the scenes, Bitcoin is delivering subtle hints that all may not be so bad when it comes to overall network strength.
According to the Illiquid Supply Shock Ratio (ISSR) calculation, there is a greater chance of a larger supply-induced rush for BTC than at any point in nearly a decade.
ISSR, created by statistician Willy Woo and crypto researcher William Clemente, “attempts to model the probability of a Supply Shock forming,” explains research firm Glassnode in the chain.
Simply put, it assesses how much of the supply is available versus current demand, and given the ongoing trend of ferreting BTC away to cold storage, the signal is clear.
As of December 10, the ISSR measured 3,537, the highest since August 2014.
Hayes Says Bitcoin Miner Selloff ‘is Over’
A final silver lining for the future comes courtesy of Bitcoin mining research from former BitMEX CEO Arthur Hayes.
Related: Bitcoin’s Dull Price Action Lets XMR, TON, TWT and AXS Gather Strength
In his latest blog post on December 9, Hayes, well known as an industry commentator, took exception to the pervasive narrative surrounding the miners’ economic boom and its impact on the markets.
As Cointelegraph reported, increasing selling of BTC by miners struggling to stay afloat has led to concerns that a large capitulation event could flood the market with liquidity.
This is not the case, Hayes says, going on to show that “even if miners sold all the Bitcoin they produced each day, it would barely affect the markets at all.”
“Therefore, we can ignore this ongoing selling pressure as it is easily absorbed by the markets,” he stated.
Hayes continued that the bulk of BTC sales from both miners and lenders, known as centralized lending firms (CELs), had likely already occurred.
“I believe that the forced selling of Bitcoin by CELs and miners is over. If you had to sell, you would have done it already,” he wrote.
“There is no reason why you would hold on if you had an urgent need for fiat to remain a going concern. Given that almost all major CELs have either ceased withdrawals (which at best points to insolvency) or have gone bankrupt, no more miner loans or collateral to be liquidated.”
Glassnode data, meanwhile, shows that the 30-day change in supply held by miners, while still declining, is cooling from recent highs, supporting the theory that sales are slowing.
“Fears of Distressed Bitcoin Miners Creating Selling Pressure Are Overblown,” Bitcoin Mining Analyst Jaran Mellerud addedwhich responds to Hayes’ piece.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
