‘Imminent’ crash for stocks? 5 things to know in Bitcoin this week
Bitcoin (BTC) starts its first full week of December at three-week highs as bulls and bears battle on.
After a weekly close just above $17,000, BTC/USD seems determined to make the most of the relief in equities and a weakening US dollar.
As the US prepares to release November inflation data, the dollar looks set to be a key element to watch as BTC price action teases a recovery from the pits of the FTX meltdown.
All may not be as simple as it seems – miners face serious difficulties, data shows, and opinions on stocks’ own ability to continue higher are far from unanimous.
As the end of the year approaches, will Bitcoin see a “santa rally” or face another year of new losses?
Cointelegraph presents five areas worth watching in the coming days when it comes to BTC/USD performance.
Bitcoin Traders Diverge Over ‘Santa Rally’
Slight relief for Bitcoin bulls this week comes in the form of a solid weekly close followed by a rally to multi-week highs.
BTC/USD hit $17,418 on Bitstamp in the hours after the close, taking the pair to its highest levels since November 11, data from Cointelegraph Markets Pro and TradingView show.
For traders, there is reason to believe that short-term strength may hold, allowing Bitcoin to move closer to $20,000.
“No change in my expectations. Still looking for 19k+,” Credible Crypto confirmed to Twitter followers on December 4.
“$BTC has formed a nice tight consolidation here after a clean impulse on the low time frame. May drop into 16,000 first to take out these built-up lows, but still expect continuation up after, regardless.”
Fellow trader Dave the Wave, meanwhile, put his faith in a Christmas rally coming nextwhile others, including popular commentator Mustache, said the time was historically ripe for recovery.
Comparing the 2022 bear market to previous ones, he explained that BTC/USD should now find a bottom, 31 weeks after the last record high.
“Bitcoin bottom should be very close,” he repeated in the weekend.
However, not everyone is as optimistic. For the Crypto Kingpin, there is room for a move to $18,000 before Bitcoin starts to “tear lower.”
Although he does not mention exact downside targets described the weekly ending as “conflicting”.
“I remain of the belief that this rally in btc is part of a corrective abc w4 before making another low below $15k into Q1 2023 where we find a long term bottom,” another popular trader, Bluntz, tweeted after weekly closing.
Similarly conservative on lower timeframes is trader Korinek_Trades, who despite calling for a “big relief” on Bitcoin recognized that downside could take it as low as $12,000.
Crypto voices cautious on stocks due to ‘imminent’ crash claims
The coming week in macro marks the precursor to the important US consumer price index (CPI) for November, due on 13 December.
Meanwhile, the US producer price index (PPI) and unemployment data later in the week will be dates to watch for traders, and these traditionally triggered the least short-term volatility.
Looking at US stocks, the tone among crypto traders and beyond seems tense, despite recent strength in the face of a falling dollar.
The S&P 500 (SPX) ended the previous week up 1.66% at 4,071 points.
“Unless we take out 4,300 on volume and hold above, for me this is an upturned rally. It can take a few weeks to climb up, says Crypto Tony warned over the weekend.
An extra tweet revealed doubts that Bitcoin is avoiding negative effects despite stocks already significantly underperforming in the wake of FTX.
“This is a very plausible scenario,” Crypto Tony commented next to a chart.
“If we really do see a continued crash in the stock market due to high interest rates, defaults, etc., I expect Bitcoin to follow suit. Until then we will simply range in my opinion while there are minimal buyers.”
This sentiment echoed a forecast by popular commentator, Nunya Bizniz, who previously suggested that the SPX may stage a “goblin rally” before reversing.
The strongest outlook for stocks came from Michael A. Gayed, the renowned portfolio manager and author of the investment strategy circular “The Lead-Lag Report.”
In a comprehensive Twitter digest On December 3, Gayed went beyond caution, telling readers that an “imminent stock market crash” was next.
“My point is that there is lag and markets have a funny way of surprising the public out of nowhere,” read part of one post.
“It is not impossible to see a scenario where the butterfly creates the hurricane.”
He added that FTX itself had created unusual market responses even beyond crypto.
Miners already in “gigantic capitulation”
The FTX saga is increasingly beginning to show itself in the struggles of Bitcoin miners.
The latest data shows that the 30-day change in BTC supply held in miner wallets is at its most negative since the start of 2021.
The figures, from the analysis firm Glassnode in the chain, come in the form of the Miner Net Position Change calculation. As of December 3, miners were down a total of 17,721 BTC over 30 days.
Additional data confirmed the miners’ total BTC balance which saw a further steep decline in early December, falling from 1,828,630 BTC on November 30th to 1,818,303 BTC on December 3rd.
The last time the miners’ balance was this low was in September 2021.
As BTC/USD fell 16% during November, miners suddenly faced already slim margins pushed beyond the point of no return.
This means “capitulation” when they disconnect, commentators argue, and a period of flux is now entering.
“November was a horrible time for BTC miners,” popular analyst Satoshi Stacker in summary.
“Bitcoin miners had gone bankrupt in previous cycles before things got better. We’re in the middle of a giant Bitcoin mining capitulation now.”
An accompanying list of dismal financial results from public miners underscored the theory.
As Cointelegraph reported, Bitcoin’s Hash Ribbons metric is already flagging a capitulation phase in the making, its two moving averages crossing over just months after miners abandoned their last capitulation.
The difficulty level is set to the biggest drop in 17 months
With Bitcoin miners under stress, underlying networks are beginning to reflect changes in activity.
At its next automated readjustment on December 6, mining difficulty will drop by an estimated 7.8%, according to BTC.com data.
The weeks following the FTX meltdown have produced strange changes in network participation, and analysts have suggested various reasons why fundamentals have deviated from price action.
As Cointelegraph reported, one theory even argued that Russia was driving the market by adding significant hash power despite miners en masse seeing significantly reduced profitability.
While the hash rate was still increasing after FTX and the subsequent BTC price drop, things started to change towards the end of November. Hash rate fell from near all-time highs, and difficulty with that.
The upcoming drop in difficulty will even be Bitcoin’s biggest since July 2021, when a single readjustment saw it drop over 27%.
Meanwhile, for Timothy Peterson, chief investment officer at Cane Island Alternative Advisors, there is even reason to believe that difficulties could preclude a macro BTC price bottom.
In a chirping On November 29, he argued that when the 200-day moving average of BTC/USD and its “difficulty value” — a difficulty-derived BTC price value — converge, it has historically signified a bottom formation.
“A bitcoin buy signal is in sight. Warning: based on historical conditions that may no longer hold,” he commented.
“Still, I think difficulty is a good indicator of a minimum level of demand for bitcoin. The convergence is at 12k, which means the price has to be +/- 12k for 200 days.”
Such a formation, accompanying charts showed, cannot enter until mid-2023.
Sentiment Avoids ‘Extreme Fear’
As Bitcoin price action fends off further macro lows, sentiment also avoids volatility.
Related: How Much Is Bitcoin Worth Today?
The ever-popular sentiment gauge, the Crypto Fear & Greed Index, remains pegged to an area just above its “extreme fear” zone.
After falling in line with the price post-FTX, a modest recovery has been underway, despite the general impression that further lows are on the way.
The strange deviation of many commentators’ forecasts is reinforced by the state of affairs “on the ground” for investors themselves.
As Cointelegraph reported, realized and unrealized losses for the BTC supply are reaching levels never seen before, and the supply as a whole is in a net loss, according to the Market Value to Realized Value (MVRV) metric.
MVRV compares Bitcoin’s market value to its realized cap – the aggregate price to which the supply last moved. When the latter crosses below the former, it has signaled price floor structures.
Describes these structures as an “accumulation zone,” meanwhile, popular commentator CryptoNoob said current conditions may even present a “lifetime investment opportunity” for Bitcoin.
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.
