Bitcoin (BTC) starts a new week bearishly or as a firm “buy” depending on the source – what happens next?
After a week of uninspiring price development, the largest cryptocurrency is still in the lower $ 30,000 range.
Nonetheless, with inflation troubling traditional markets and the summer months, which are traditionally good for bulls, there may be cause for optimism. However, anything can happen with Bitcoin and surprises fluctuate in both directions.
Cointelegraph Markets examines five factors to consider when plotting the next BTC / USD rate.
Inflation terrifies macro sentiment
Thanks to the holidays in the US, UK and elsewhere in the west, it’s a quiet day for stocks and commodities.
However, the Asian markets are largely stable anyway as traders prepare for the start of the traditionally slower summer period.
However, if you zoom out, the picture becomes significantly less stable. The reason, sources tell the mainstream media, is inflation.
In the midst of the international coronavirus recovery fueled by the huge amount of liquidity created by central banks, which has long been a cause for concern, the long-term effects of the planned “recoveries” are looming on the global horizon.
Some tell-tale signs are already there, such as rising manufacturing costs, which may not be fully reflected.
“Policymakers have pledged to accept higher levels of inflation and higher volatility in inflation, and when that happens, inflation will rise structurally higher,” Mixo Das, equity strategist at JPMorgan Asia, told Bloomberg.
“I don’t think that’s included in the prices yet.”
Inflation is inherently the opposite of a Bitcoin standard due to the cryptocurrency’s fixed supply and declining issuance curve that cannot be manipulated.
Therefore, demand from institutions and those with high cash exposure should continue to grow in line with inflation, which is increasingly tolerated by central banks at higher levels.
In a debate on Bitcoin’s energy consumption earlier this month, Saifedean Ammous, author of The bitcoin standard, Suggested that around 10% of global wealth is already wiped out every year by inflation.
Weak hands can’t stop selling
It’s a somewhat bleak picture for Bitcoin hodlers on Monday as the weekend showed no signs of bullish price rally.
At the time of writing, BTC / USD is below $ 36,000 after sliding slowly since hitting local highs of $ 41,000 last week.
Those highs came shortly after another re-test of $ 30,000 support, which saw Bitcoin hit $ 31,000, reestablishing the familiar trading corridor it has been moving into since surrendering in early May.
Depending on who you ask, this setup is either a golden accumulation opportunity or a nightmare – and the breakdown seems to be in line with market experience.
At the current level, old hands are expanding their BTC stack while the youngest buyers keep selling to them, according to new data from on-chain monitoring resource Glassnode.
This classic “weak hands to strong” direction is nothing new, but its pace is increasing.
The miners are also back in the buying process, reversing a brief cascade of sales that accompanied the initial drop to $ 30,000.
“This chart is insane!” The popular Twitter account Lark Davis responded, underscoring the excitement among long-time market participants.
“Miners and long-term owners accumulate, sell only short-term owners. Nothing new under the sun! “
Bitcoin’s weekly Relative Strength Index (RSI), an important metric for identifying overbought and oversold territory, is also circling at lows, only topped by the crash in March 2020 and the surrender of $ 3,100 in December 2018.
Major price averages are giving bulls a headache
When it comes to bulls or bears, there are “lines in the sand” for traders that Bitcoin has yet to preserve in order to keep its bull market crown.
In its latest market update, the DecenTrader trading suite highlighted the 200-day moving average (DMA) and the 20-week moving average (WMA) as important values to watch out for.
The 200 DMA is currently at just over $ 40,000 – the place where BTC / USD was rejected last week – while the 20 WMA is close to $ 49,000 higher.
“Should Bitcoin find sufficient demand in the low 30s, the 20 WMA is expected to act as a resistor,” summarized DecenTrader.
“A decline would likely make the low $ 20 or the 78.6% retracement a likely target. Therefore, a price move in the next week is particularly important. “
The notion that Bitcoin could plunge to its peak of $ 20,000 in 2017 is unpopular with many, including PlanB, the creator of the stock-to-flow (S2F) pricing models.
Although he recognizes that his models have still been “tested” by price fluctuations, he doesn’t think the idea of a new surrender up to $ 20,000 is likely.
“Of course I disagree, S2F and On-Chain indicate much higher prices ($ 100-288,000 USD). Time will tell, ”he said during the Twitter discussions last week.
He added that Bitcoin’s “realized price” – a calculation of BTC / USD based on the price at which each coin was last moved – is now $ 23,000. During the bull runs in 2013 and 2017, the realized price rose by an order of magnitude – and this year they have yet to be copied.
“At $ 23,000, we still have a long way to go before the IMO,” he commented alongside a chart showing the realized price versus the 200 WMA.
Funding rates alleviate concerns
For some counterpoints, an example of the hidden upward movement that can serve to characterize short-term price movements is in exchange rates.
Currently negative for health, these indicate that in the current circumstances it is to a large extent shorts that pay longs.
“Open Interest has not recovered as leverage participants were largely wiped out by the sell-off and are not re-entering. Funding has also stayed low / negative which continues to reflect the market, ”added DecenTrader.
As Cointelegraph reported, surrendering leveraged bets during the $ 30,000 sell-off effectively reset the market composition as traders avoid risk.
This should allow for stronger organic price growth, driven by real demand from those who hold BTC for the long term rather than as a short term speculative wager.
Worst May ever?
Is this the worst May ever? In terms of monthly returns for bitcoiners, it definitely looks like it.
On the last day of May 2021, the mood should be anything but positive, because the monthly losses for Hodler amount to almost 40%.
In comparison, May tends to be a lucrative month for BTC / USD – for example, in 2017 and 2019 the pair gained more than 50% in May.
2018 was an outlier with a 19% loss, but even that pales in comparison to this year. May 2021 is currently well on its way to being the worst month since 2013 in terms of both Q1 and Q2 performance.
And yet, doom and darkness are far from everywhere. Beyond Bitcoin, altcoin markets are showing signs of life, led by an ongoing rebound in XRP, which is up 13% over the day.
As traders note, the volumes for the largest altcoin, particularly ether (ETH), are promising and contrast with bear market behavior, which tends to have little trading activity.
“We shouldn’t care too much about a weaker BTC as it could follow the stronger alt / usd pairs or continue its chop / sideways while the alts rise,” concluded trader Cypto Ed.