‘Wild ride’ lower for BTC? 5 things to know in Bitcoin this week
Bitcoin (BTC) starts a new week, still in holiday mode, with the US financial markets off for Independence Day.
The largest cryptocurrency, which is stuck below the increasingly frightening $ 20,000 limit, continues to feel pressure from the macro environment as talk of lower levels remains ubiquitous.
After a quiet weekend, hodlers find themselves stuck in a narrow area, while the prospect of an eruption on the upside seems increasingly difficult to believe.
As a trader and analyst cites July 4 as the site of a “wild run to the downside” for crypto markets, the countdown is underway for Bitcoin to cope with the recent rise in interest rates in the Federal Reserve.
What else can the coming week have in store? Cointelegraph takes a look at the potential market movement factors for the days ahead.
The BTC price refers to its time over the long weekend
Bitcoin came out unscathed over the weekend, but the classic pitfalls of off-peak trading remain.
The United States will not return to the trading table until July 5, which provides good opportunities for classic weekend price action in the meantime.
So far, the market has held back when it comes to volatility – with the exception of a brief increase to $ 18,800, BTC / USD has circled the range between $ 19,000 and $ 19,500 for several days.
Even the weekly close gave no real trend change, data from Cointelegraph Markets Pro and TradingView showed, with the psychologically significant $ 20,000 unchallenged.
“Even though we are below the low range, we can expect a fall down to $ 18,000,” the popular trading account Crypto Tony repeated to Twitter followers as part of a recent July 4 update.
“Been some really boring days in the markets and this is classic for a middle class.”
In terms of downward targets, others continued to see the area around $ 16,000.
In 2018, The Orange MA was the bottom. In 2020, The Green was MA Bottom. Currently holding Green MA (16-17K). If it breaks, there is a possibility of Next Bottom Blue MA (12-13K) $ BTC pic.twitter.com/rZILTAOlXf
– Trader_J (@Trader_Jibon) July 3, 2022
Without a meaningful Bitcoin futures gap and flat performance in Asian markets, meanwhile, there was little to be gained from short-term price targets for short-term traders.
The US dollar, meanwhile, continued to stay close to twenty years high after returning from its last retracement despite.
The US Dollar Index (DXY) was above 105 at the time of writing.
Gold is approaching a “blast off” against US equities
With Wall Street closed for Independence Day, US stocks could catch their breath on Monday.
For a popular chartist, however, attention focuses on the strength of stocks versus gold in the current environment.
In a Twitter thread this day, gold monitor Patrick Karim specifically flagged that the precious metal was about to hit a historic “explosion” zone against the S&P 500.
After the bottom at the end of 2021, the relationship between gold and S&P has recovered through this year, and is now in the process of crossing a border, which has historically led to a significant upside afterwards.
“Gold is approaching an” explosion zone “versus US equities. Previous departures have provided important gains for Silver & Miners, “commented Karim.
The situation can not be said to be the same in US dollars, with the USD strength holding XAU / USD below $ 2000 since March.
Nevertheless, for silver fans, the implications are that even a modest push-through for the XAU / SPX ratio will yield significant returns.
Note that you do not have to go back to previous 2011 heights for #gold against #spx compared to having MUCH higher nominal prices for silver and miners.
Think about it for a moment.
– Patrick Karim (@ badcharts1) July 3, 2022
The forecast again raises questions about the extent of Bitcoin’s ability to break with macro trends. An outburst against BTC for gold would be the natural contagious effect if Karim’s scenario were to play out thanks to the ongoing correlation with equities.
“After escaping the sideways pattern that had formed over a period of 1.5 years, the correlation coefficient increased sharply to 86% vs. the S&P 500,” popular trader and analyst CRYPTOBIRB summarized in the weekend.
“Now, with a ratio of 0.78, it is still strongly positive.”
Co-analyst Venturefounder noted that Bitcoin also remains linked to movements in the Nasdaq.
Meanwhile #Bitcoin and #NASDAQ trends still together.
Note previous bottoms (Dec 2018 and March 2020) happened as #BTC and $ QQQ correlation at the top, indicating that macro has always affected the BTC bottoms. We can predict more likely that macro will call the bottom for BTC again this time. pic.twitter.com/szmS4c6WV8
– venturef ◎ undΞr (@venturefounder) June 26, 2022
Against the dollar, Cointelegraph reported in the meantime, Bitcoin’s inverse correlation is now at 17-month highs.
Crunch time for Hayes’ “would ride to the downside”
July 4, apart from being Independence Day, is especially seen by one market player as a holiday without equal – at least for Bitcoin.
With closed markets and BTC price actions already on the verge of support, Arthur Hayes, former CEO of the derivative platform BitMEX, has designated this long weekend as a long day of accounting for crypto markets.
The reasoning seems logical. At the end of June, the Federal Reserve raised its key interest rates by 75 basis points, which provided fertile ground for a negative reaction from risk assets. Low liquidity “outside opening hours” holiday trading increases the potential for volatile price movements up or down. Combined, the cocktail, Hayes warned last month, could be potent.
“By June 30 (end of Q2), the Fed will have adopted a 75 bps rate hike and begun to shrink its balance sheet. July 4 falls on a Monday, and is a federal and bank holiday “, he wrote in a blog post.
“This is the perfect setup for another mega crypto dump.”
So far, however, no sign of what Hayes says will be a “wild trip to the bottom” has materialized. The BTC / USD has remained virtually static since the end of last week.
The deadline should be Tuesday 5 July, as the return to traders and their capital can provide the liquidity needed to stabilize the markets, as well as buy up any coins that become cheap in the event of a last-minute downturn.
Hayes added that his earlier forecasts that BTC / USD would bottom out at $ 27,000 and ETH / USD at $ 1800 were already “in shambles” in June.
The mining difficulty is still increasing
Despite significant concerns about the miners’ ability to withstand the current BTC price decline, Bitcoin’s network base remains calm.
An impressive testament to the miners’ willingness to remain on the network, difficulties are not planned to be reduced in the coming restructuring this week.
After declining by a modest 2.35% two weeks ago, the degree of difficulty, which automatically rises and falls to take into account fluctuations in the participation of miners, will hardly change this time.
According to estimates from the chain monitoring resource BTC.com, the degree of difficulty will even increase if current prices remain the same, adding 0.5% to what is a calculation that is still close to all-time highs.
As for the miners themselves, opinions are that it is the less efficient players – possibly newcomers with a higher cost base – who have been forced to quit.
Data uploaded to social media by Charles Edwards, CEO of Asset Manager Capriole last week, meanwhile puts the cost of production for miners en masse at around $ 26,000. Of that, $ 16,000 is electricity, which means that mining costs directly affect their ability to limit losses in the current environment.
“We traded below electric costs in June, but the floor has since fallen as inefficient miners capitulate,” Edwards noted.
A sea of downturns
Bitcoin on-chain calculations that point to record sales are nothing new this year and especially in recent weeks.
Related: Top 5 cryptocurrencies to see this week: BTC, SHIB, MATIC, ATOM, APE
The trend continues in July, as the network returns to scenarios not seen since the wake of the crash across markets in March 2020.
According to the chain analysis company Glassnode, the number of coins used at a loss is now the highest since July 2020. Glassnode analyzed the weekly moving average of unused transaction outputs (UTXOs) in losses.
Similarly, the percentage of UTXOs in profit reached a two-year low of just over 72% on 3 July.
Bear markets can produce some welcome, if rare, silver fodder. Bitcoin transaction fees, once painfully high during bullish periods of intense network activity, are now also at their lowest level since July 2020. The median fee, Glassnode reveals, is $ 1.15.
As Cointelegraph reported, the same goes for Ethereum network gas charges.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should conduct your own research when making a decision.
