Despite being Bitcoin’s highest weekly closing since June, volatility entered the market as soon as the new week began.
After recording its strongest weekly finish since mid-June, Bitcoin (BTC) kicks off the new week with a bang. Will the good times last?
Following a turbulent weekend, BTC/USD was able to contain losses until the weekend’s latter hours, resulting in a strong green candle on weekly timeframes.
Bulls have time on their hands in what may end up being the last “calm” week of the summer due to the lack of significant macro market factors including the US Federal Reserve.
The fact that Bitcoin’s mining difficulty will rise for the second time in a row in the coming days is a sign that the currency’s fundamentals are still solid.
On the futures markets, there are also optimistic signals, with rising price levels and bullish statistics over mood.
Therefore, hodlers must now determine how strong the recovery is and if it is only a bullish countermove within of a larger bear market.
Coinscreed lists five variables that might affect pricing this week and determine Bitcoin’s course.
Bitcoin welcomes volatility after closure at a multi-week high.
The BTC/USD weekly close on August 14 was the greatest in the last two months, coming in at roughly $24,300.
The weekly chart depicts a gradual ascent that has been developing since the June lows, and last week’s candle had a total value of almost $1,100 or 4.8%.
A remarkable increase by 2022, the gains generated some volatility overnight into the opening day of the week’s Wall Street trade. BTC/USD continued to reach $25,200 on exchanges before dramatically retreating beneath the weekly close level.
Such movements have typified recent days, so traders who continue to operate carefully on shorter timeframes are not particularly surprised.
The bears have intervened thus far to retest several important levels as a new week starts, according to the popular trading account Crypto. In part, Tony recounted the day in his most recent tweet:
“Once again, we should see an interesting week with price action. Been all over the shop on the lower time frames.”
According to the on-chain monitoring tool Material Indicators, if unpredictable behavior persists, there is a strong likelihood of a downmove.
The weekly chart started to suggest “downward momentum” after the close, it cautioned, while the daily timeframes were “flat” according to its in-house trading tools.
This week has been dubbed the “last week of the bear rally” by its author, Material Scientist.
Gold bug Peter Schiff insisted that a considerably bigger drop of much more than $10,000 was still possible, which was maybe not unexpected.
However, Rekt Capital, a fellow trader, and analyst were unperturbed by the price development of BTC over the longer term.
Until the subsequent block subsidy halving event in 2024, he advised using a spot price under $25,000 to dollar cost average (DCA) into Bitcoin by purchasing a certain amount every predetermined length of time.
Over the weekend, he tweeted, “To win in Crypto, you need a dollar-cost averaging technique, an investment thesis, a vision, & patience:
“My DCA strategy is anything sub $25000. My thesis is based on the 2024 Halving event Vision is seeing Bull peak a ~year post-Halving. Now I’m just patient.”
Macro is still “on the razor edge”
After the United States inflation data from last week, the next five trading days seem to be quite quiet.
The Fed is silent, thus the only thing that may affect market performance are unforeseen developments in Europe or Asia.
However, one well-known expert claims that the possibility of crypto continuing to have knee-jerk responses to macro triggers beyond inflation may already be smaller than many belief.
DecenTrader Filbfilb saw a declining link between BTC and what he dubbed “legacy markets” more generally in a recent market report for his trading platform.
Using the S&P 500 in white and the NASDAQ in blue as examples, he noted, “Bitcoin was following a strong correlation with legacy markets, as seen below. However, after hitting the most recent bottom, all of the downside on the legacy markets has been reclaimed, and Bitcoin has failed to follow suit.”
According to Filbfilb, the spot price of Bitcoin has not rebounded as much as it should have since June’s $17,600 lows, despite the fact that its historical connection would suggest otherwise.
The Terra and Celsius scandals, when combined with worries about inflation and the Fed’s response to it, create something like a perfect storm.
“The tendency of Bitcoin to be at the mercy of the Fed’s effort to fight inflation has not altered. The most recent instance of better-than-expected inflation statistics on Wednesday allowed Bitcoin to surge north with stocks, according to the update:
“Moving forwards, the CPI data and following monetary policy decisions are going to continue to be paramount in determining what happens next.”
Additional risk concerns come from geopolitical events like the war between Russia and Ukraine, tensions over Taiwan, and the impending energy crisis in Europe. Therefore, Filbfilb said, the macroeconomic situation is still “on a knife edge.”
Meanwhile, news from China, which implemented a sudden rate decrease in response to weak economic statistics, deviates from the day’s trend.
In reaction, Raymond Yeung, Greater China economist at Australia & New Zealand Banking Group Ltd., told Bloomberg that “July’s GDP data is highly frightening”
“Authorities need to deliver a full-fledged support from property to Covid policy in order to arrest further economic decline.”
Lex Moskovski, the CEO of Moskovski Capital, predicted that all central banks will ultimately decide to reduce interest rates rather than raise them:
They will all change course, he said.
Despite Bitcoin reaching $25,000, funding rates are strong.
While doing so, it becomes apparent that circumstances may still be favorable for more upside when considering how the recent spot price movement has affected trading practices.
Philip Swift, a developer at DecenTrader and the creator of the data site Look Into Bitcoin, emphasized negative financing rates while analyzing the derivatives markets.
Moderately negative rates are often the basis for future gains, indicating traders’ growing certainty that a decline is imminent. This is so that short positions may be “squeezed” by wiser money since the market anticipates the downside and does not overbet on profits materializing.
Bitcoin, as well as crypto markets in general, often operate in the exact opposite way to what the majority anticipates.
Swift uploaded a chart demonstrating price behavior in previous instances of similar settings and remarked, “Interesting to see Funding Rate dip negative at times on this current grind up for $BTC:”
“Note how price has pumped after each occasion.”
Data from the analytics tool Coinglass, however, demonstrated the amount of negative financing in comparison to the weeks after the June spot price lows.
Difficulty brought by a second consecutive rise
While this is happening, the foundations of the Bitcoin network are recovering slowly rather than rapidly.
The most recent figures from BTC.com’s statistics site reveal that mining activity is gradually returning to its previous levels.
At the impending automatic readjustment this week, difficulty is expected to rise for the second time in a row following months of reduction.
Although small, the anticipated 0.9% rise demonstrates that mining competition is nevertheless growing and that higher prices are relieving for a region of the Bitcoin ecosystem that has been under a lot of strain this year.
As a measure of the processing power devoted to mining, hash rate estimates stay stable at or around 200 exahashes per second (EH/s).
Crypto Fear & Greed Index reaches 4-month highs.
Even if the price of Bitcoin has reached a two-month high, this is not the only area of the market that has made significant gains this week.
The Crypto Fear & Greed Index, a mood indicator, indicates that there is less “fear” among participants in the cryptocurrency market now than there has been since early April.
According to the most recent data, the Index, which derives a normalized score from a variety of mood-related variables, has fully recovered all losses caused by the Terra blowout and beyond.
This score reached 47/100 during the weekend, its highest mark since April 6, before falling to 45/100 on the day.
Although the statistic indicates that “fear” is the dominant market force, it is a long cry from the levels of “severe dread” that persisted for a record amount of time in 2022. The Index reached its lowest points this year in mid-June, when a score of barely 6/100 was recorded.