Bitcoin (BTC) enters a new week with a question mark over the fate of the market ahead of another key US monetary policy decision.
After sealing a successful weekly close – its highest since mid-June – BTC/USD is much more cautious as the Federal Reserve prepares to raise benchmark interest rates to fight inflation.
While many hoped the pair could break out of its recent trading range and continue higher, the weight of the Fed is clearly visible at the start of the week, adding pressure to an already fragile risk asset scene.
This fragility is also manifesting in the fundamentals of the Bitcoin network as miner pressure becomes real and the true cost of mining through the bear market emerges.
At the same time, some on-chain metrics are showing encouraging signs, with long-term investors still refusing to give in.
Cointelegraph takes a look at the week’s possible market moves in a tense week for crypto, stocks and more.
Fed to decide next rate hike in ‘otherwise fun’ week
The story of the week, all things being equal, is definitely the Federal Reserve rate hike.
A familiar story, the Federal Open Markets Committee (FOMC) on July 26-27 will see policymakers decide on the size of the next interest rate move. It is estimated at 75 or 100 basis points.
Inflation in the United States, as in many jurisdictions, is at its highest level in forty years, and its rise appears to have taken the establishment by surprise as calls for a spike are met with even bigger gains. .
“It should be another fun,” William Clemente, chief analyst at Blockware. abstract July 25.
The interest rate decision is expected on July 27 at 2:00 p.m. EST, a date that may well come with heightened volatility in risk assets.
This could be exacerbated, an analyst warned, thanks to weak summer liquidity and a lack of buyer conviction.
“Entry into ECB/FOMC/Tech earnings amid weakest liquidity of the year. Market is back to overbought. Bulls, keep it high,” Mac10 Twitter account wrote.
A previous article also flagged second-quarter earnings reports potentially contributing to a decline in line with previous behavior.
Tech Earnings and the FOMC were the catalyst for two major crashes in 2022.
“This time will be different” pic.twitter.com/XgS1dDOLce
— Mac10 (@SuburbanDrone) July 22, 2022
“BTC and risk assets rose during FOMC events this year, only to sell off afterwards, is this time any different?” other Tedtalksmacro analytics account continued:
“The June FOMC meeting saw the US Federal Reserve hike 75 basis points – the biggest since 1994. Bigger hikes are expected before inflation ‘normalises’.”
The week already looks different to last, even before events begin to unfold – Asian markets are flat against last week’s bullish tone, which accompanied a resurgence in Bitcoin and altcoins.
While one argument says the Fed can’t raise rates much more without dragging the economy down, in the meantime, Tedtalksmacro pointed to the jobs market as a target to hold future hikes.
“Bitcoin will struggle to break above 28,000 until the data deteriorates,” he said. added.
Spot price fails to set key moving average
Bitcoin’s last weekly close was something of a halfway house for bulls, data from Cointelegraph Markets Pro and TradingView shows.
While managing its best performance in over a month, BTC/USD missed the essential 200-week moving average (MA) recovery at $22,800.
After the close, which settled at around $22,500, Bitcoin began to fall to the bottom of its last trading range, still remaining below $22,000 at the time of writing.
Upcoming graphics updates
— CryptoTony (@CryptoTony__) July 25, 2022
“Watching IF, we find support at $21,666 horizontal. Patience”, popular trader Anbessa Told Twitter followers in its latest update.
Another Crypto Chase account, meanwhile, suggested that a return to the 200-week MA would lead to a further modest rise.
“Cut around the Daily S/R (red box) with an inability to return 22.8K (daily resistance) to support. Several attempts to do so, but without success so far,” he said. wrote accompanied by explanatory tables:
“If price pushes above again and is accepted, I will be watching 22.8K to become support for a potential long entry at 23.2K.”
A later update to the eyes $21,200 as a potential downside target, which also forms a support/resistance level on the daily chart.
At $21,900, however, Bitcoin still remains around $1,200 higher than the same point a week ago.
Elsewhere, the latest price action was not enough to change the long-term outlook. For Venturefounder, a contributor at on-chain analytics firm CryptoQuant, a macro fund had yet to appear, with that amount potentially as high as $14,000.
“Consistent with past halving cycles, these are still my most viable predictions for Bitcoin ahead of the next halving: BTC will capitulate over the next 6 months and bottom out in the cycle (anywhere between 14 and $21,000), then cut around $28,000-40,000 in most cases by 2023 and be back to ~$40,000 by the next halving,” a prediction retweeted at origin of june reiterated.
Difficulty returns to March levels
In a sign that miners’ troubles due to low prices may be just beginning, upheavals are now visible on the Bitcoin network.
Difficulty, the measure of competition among miners that adjusts for participation, has been declining since late June and has now returned to levels not seen since March.
The most recent tweak was particularly notable, reducing the difficulty total by 5% and heralding a change in miner activity. This was the biggest drop since May 2021, and the next one, due in ten days, is currently expected to reduce difficulties by a further 2%.
As arguably the most important aspect of the Bitcoin network itself, difficulty adjustments also set the stage for recovery by leveling the playing field for miners. The lower the difficulty, the “easier” – or less energy-intensive – it is to mine BTC because there is less competition overall.
In the meantime, however, the need to stay afloat remains a concern, according to the data. According to CryptoQuant, miners sent 909 BTC to exchanges on July 24 alone, the most in a day since June 22 and a decrease in difficulty of 5%.
A turnaround for the miners therefore remains out of sight this week.
As Cointelegraph also reported, it is not just the price of BTC that is giving miners a hard time under current conditions.
Kudos to the MVRV-Z score
One of Bitcoin’s hottest on-chain metrics just broke through what is arguably its most important level – zero.
On July 25, Bitcoin’s MVRV-Z score moved back into negative territory after a brief week above, falling into the zone usually reserved for macro price lows.
Before: 0.010 -> Now: -0.000
View metric: https://t.co/IBVIM3J84o pic.twitter.com/DRGqIxKW7w
— glassnode alerts (@glassnodealerts) July 25, 2022
MVRV-Z shows how overbought or oversold BTC is relative to “fair value” and is popular due to its amazing ability to set price floors.
Its return could signal a new period of price pressure, as the accuracy in capturing the dips has a margin of error of two weeks.
In early July, Cointelegraph reported on MVRV-Z, giving a worst-case scenario of $15,600 for BTC/USD this time around.
Sentiment cools after four-month highs
For the crypto market, the past week may well have been a brief period of irrational exuberance if the sentiment data is to be believed.
Related: Top 5 cryptocurrencies to watch this week: BTC, ETH, BCH, AXS, EOS
The latest figures from the Crypto Fear & Greed Index show a steady decline from what has been the most positive market sentiment since April.
As of July 25, the index stood at 30/100 – still described as the “fear” that drives the general mood, but still five points above the “extreme fear” band the market has previously passed through. a record 73 days.
Sentiment has nonetheless made a big comeback since mid-June, when Fear & Greed hit some of its lowest levels ever at just 6/100.
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