Bitcoin (BTC) Starts a New Week Still in Vacation Mode since in the United States it is Independence Day.
The largest cryptocurrency, stuck below the increasingly grim $20,000 mark, continues to feel pressure from the macro environment while lower level rumors remain pervasive.
After a quiet weekend hodlers are stuck in a tight range as the prospect of a breakout to the upside looks increasingly hard to believe.
One trader and analyst has pointed to the 4th of July as the site of a “wild race to the bottom” for crypto markets, and for his part, the countdown is on for bitcoin to weather the fallout from the latest Federal Reserve rate hike.
What else can the next week hold? Cointelegraph takes a look at the possible market moving factors for the coming days.
BTC price bides its time during the long weekend
Bitcoin has come out of the weekend unscathedbut the classic pitfalls of off-peak operations remain.
The United States will not return to the trading desks until July 5, which offers ample opportunity for classic weekend price action.
So far, the market has held off when it comes to volatility. With the exception of a brief rally to $18,800, the BTC/USD pair has been circling in the $19,000-19,500 zone for several days.
Even the weekly close did not provide any real trend changeas data from Cointelegraph Markets Pro and TradingView showed; the psychologically significant levels of $20,000 have so far gone unchallenged.
“It has been a very dull few days in the markets, and this is classic for a mid-range.”
As for downside targets, others continued to eye the $16,000 zone.
In 2018, The Orange MA was the Bottom. In 2020, The Green MA was Bottom. Currently holding the Green MA (16-17K). If it breaks then there is a Possibility of Next Bottom Blue MA (12-13K) $BTC pic.twitter.com/rZILTAOlXf
— Trader_J (@Trader_Jibon) July 3, 2022
In 2018, the orange MA was the bottom. In 2020, the Green MA was the bottom. The Green MA ($16,000-17,000) is currently holding. If it breaks down, there is a chance of an upcoming bottom blue MA ($12,000-13,000). BTC
With no significant gap in bitcoin futures and flat performance in Asian markets, there was little to do in terms of short-term price targets for short-term traders.
For its part, The US dollar continued to hover near 20-year highs, after coming back defiantly from its latest pullback.
The US dollar index (DXY) was above 105 at the time of writing this report.
Gold nears a ‘rally’ against US equities
With Wall Street closed for Independence Day, US equities can take a breather July 4.
Nevertheless, For a popular chartist, the focus is on the strength of equities against gold (XAU) in the current environment.
In a Twitter thread, the gold monitor Patrick Karim specifically noted that the precious metal is about to hit a historic “explosion” zone against the S&P 500 (SPX).
After bottoming out in late 2021, the relationship between gold and the S&P has recovered throughout this year and is now on the verge of crossing a threshold, which has historically led to significant subsequent rallies.
“Gold is approaching the ‘rally zone’ against US equities. Previous rallies have triggered significant gains for silver and miners,” Karim said.
It cannot be said that the situation is the same in terms of US dollars, since dollar strength keeps XAU/USD firmly in place below $2,000 since March.
Nevertheless, For silver fans, the implications are that even a modest boost to the XAU/SPX ratio will bring significant gains.
Think about that for a moment.
— Patrick Karim (@badcharts1) July 3, 2022
Keep in mind that it will not be necessary to go back to the previous highs of 2011 for the gold versus spx ratio to have MUCH higher nominal prices for silver and miners. Think about it for a moment.
Forecast again calls into question the extent of bitcoin’s ability to break macro trends. A breakout against BTC for gold would be the natural effect should Karim’s scenario play out, thanks to the current correlation with equities.
“After breaking out of the sideways pattern that had formed over a 1.5-year period, the correlation coefficient rose sharply to 86% against the S&P 500,” summarized over the weekend the popular trader and analyst CRYPTOBIRB:
“Now, with a coefficient of 0.78, it is still strongly positive.”
Your Analysis Partner Venturefounder noted that bitcoin also continues to be tied to Nasdaq movements.
Note previous bottoms (Dec 2018 & Mar 2020) happened as #BTC and $QQQ correlation at peak, suggesting macro has always influenced BTC bottoms. We can predict more likely that macro calls bottom for BTC again this time. pic.twitter.com/szmS4c6WV8
— venturef◎undΞr (@venturefounder) June 26, 2022
Meanwhile, Bitcoin and NASDAQ continue to trend together. Note that the previous bottoms (December 2018 and March 2020) occurred when the correlation of BTC and QQQ was at the peak, suggesting that the macro has always influenced BTC bottoms. We can predict that this time the macro is more likely to make BTC bottom out.
Meanwhile, Cointelegraph reported that, Against the dollar, bitcoin’s inverse correlation is now at a 17-month high.
Crunch time for Hayes’ “wild ride down”
In addition to being Independence Day, the 4th of july is being observed by one particular market player as a unique holiday, at least for bitcoin.
With markets closed and BTC price action already teetering on the edge of support, Arthur Hayes, former CEO of derivatives platform BitMEX, has signaled this long weekend as a long day of reckoning for the crypto markets.
The reasoning seems logical. In late June, the Federal Reserve raised key interest rates by 75 basis points, providing fertile ground for an adverse reaction in risk assets. Low liquidity in 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 the second quarter), the Fed will have enacted a 75 basis point rate hike and begun to reduce its balance sheet. July 4 falls on a Monday, and is a federal and bank holiday.” , wrote in a blog post:
“This is the perfect setting for another cryptocurrency mega crash.”
Nevertheless, so far the signs of what Hayes says will be a “wild ride to the downside” have not materialized. The BTC/USD pair has been virtually static since the end of last week.
The deadline should be July 5, as the return of traders and their capital could provide the necessary liquidity to stabilize the markets, as well as to buy any currency that becomes cheaper in the event of a last-minute decline.
Hayes added that his previous forecasts of BTC/USD bottoming at $27,000 and Ether (ETH)/USD at $1,800 were “already shattered” in June.
Mining Difficulty Keeps Rising
Despite considerable concern about miners’ ability to withstand the current BTC price decline, the fundamentals of the Bitcoin network remain calm.
It is an impressive testament to the miners’ determination to stay on the network: the difficulty is not scheduled to be reduced in the next reset this week.
After declining a modest 2.35% two weeks ago, the difficulty, which automatically rises and falls to account for fluctuations in miner engagement, will barely change this time.
According to estimates from BTC.com, the difficulty will even increase if current prices hold, adding 0.5% to what is a metric still close to its all-time highs.
As for the miners themselves, opinions consider them to be the least efficient players -possibly newcomers with a higher cost base- those who have been forced to leave.
The data uploaded to social media by the CEO of asset manager Capriole, Charles Edwards, last week put the production cost of mass miners at about $26,000. Of these, USD 16,000 correspond to electricity, which means that Miners’ overhead costs directly influence their ability to limit losses in the current environment.
“We traded below Cost Electric in June, however the low has since fallen as inefficient miners capitulate,” Edwards said.
A sea of minima
Bitcoin on-chain metrics pointing to record overselling is nothing new especially in the last few weeks.
The trend continues in July, as the network returns to scenarios not seen since the aftermath of the March 2020 cross-market crash.
According to on-chain analytics company Glassnode, the number of coins being spent at a loss is the highest since July 2020. Glassnode analyzed the weekly moving average of unspent transaction outflows (UTXOs) at a loss.
In the same way, the percentage of UTXOs in profit hit a two-year low of just over 72% on July 3.
Bear markets can produce some welcome silver linings, although they are rare. Previously painfully high during bull periods of intense network activity, bitcoin transaction fees are now also at their lowest point since July 2020. The median fee, Glassnode reveals, is $1.15.
As Cointelegraph reported, the same goes for gas fees on the Ethereum network.
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