The holiday weekend is making everyone nervous as BTC price action hovers at $19,000.
Bitcoin (BTC) starts a new week still in holiday mode with United States financial markets off for Independence Day.
The largest cryptocurrency, stuck below the increasingly daunting $20,000 mark, continues to feel the pressure from the macro environment as talk of lower levels remains omnipresent.
After a quiet weekend, hodlers find themselves stuck in a narrow range while the prospect of a breakout to the upside appears increasingly hard to believe.
As one trader and analyst singles out July 4 as the site of a “wild run to the downside” for crypto markets, the countdown is on for Bitcoin to weather the aftermath of the latest Federal Reserve rate hike.
What else may the upcoming week hold? The probable market-moving variables for the coming days are examined by Cointelegraph.
Bitcoin price waits it out during the long weekend.
Although Bitcoin survived the weekend intact, the usual traps of off-peak trading still exist.
Before the US returns to trading desks on July 5, there will be plenty of time for some traditional weekend price movement.
The market hasn’t been very volatile thus far; aside from a small jump to $18,800, BTC/USD has been circling between $19,000 and $19,500 for many days.
According to statistics from Cointelegraph Markets Pro and TradingView, even the weekly closure did not result in a substantial change in the trend, leaving the psychologically important $20,000 untouched.
On July 4, prominent trading account Crypto Tony underlined to Twitter followers that “when below the range bottom we may expect a dip down below $18,000”
“Been a very boring few days in the markets, and this is classic for a mid range.”
Others continued to look for objects below, in the vicinity of $16,000.
As a result of the lack of a significant Bitcoin futures gap and the Asian markets’ lackluster performance, short-term price objectives for traders were few and far between.
The U.S. dollar, on the other hand, resisted the current pullback and held steady at twenty-year highs.
As of writing, the US dollar index (DXY) was higher than 105.
Gold is about to “blow off” versus American stocks
U.S. stocks may relax on July 4 as Wall Street will be closed for the Fourth of July holiday.
However, according to one well-known chartist, the strength of stocks in comparison to gold (XAU) at the moment is the main topic of discussion.
Gold watcher Patrick Karim explicitly noted that the precious metal was about to enter a historical “blast off” zone versus the S&P 500 in a Twitter conversation (SPX).
The ratio of gold to the S&P has rebounded this year after bottoming out at the end of 2021 and is poised to breach a threshold that has historically resulted in strong gain subsequently.
“Gold is approaching the “blow off zone” in relation to US stocks. Previous takeoffs have resulted in significant benefits for Silver & Miners, said Karim.
In terms of the U.S. dollar, the situation cannot be stated to be the same due to the USD’s strength, which has kept the XAU/USD pair solidly below $2,000 since March.
The consequences for silver investors, however, are that even a slight increase in the XAU/SPX ratio will result in a big return.
The prognosis raises new concerns about how far Bitcoin can deviate from macro trends. If Karim’s scenario comes to pass, a breakthrough against BTC for gold would be the inevitable result due to the continued link with stocks.
Popular trader and analyst CRYPTOBIRB reported over the weekend that “after escaping the sideways pattern that had established for a 1.5 year period, the correlation coefficient jumped dramatically to 86 percent against S&P 500”:
At 0.78 ratio, it is still quite favorable.
Bitcoin continues to be influenced by changes on the Nasdaq, according to analyst Venturefounder.
In the meanwhile, Cointelegraph noted that Bitcoin’s negative correlation to the dollar is currently at 17-month highs.
For Hayes’ “wild trip to the bottom,” the moment is now
In addition to being Independence Day, one market participant in particular is watching July 4 as a public holiday unlike any other – at least for Bitcoin.
Arthur Hayes, the former CEO of the derivatives marketplace BitMEX, has identified this extended weekend as one long day of reckoning for the cryptocurrency markets. This is because markets are closed and BTC price movement is already teetering on the brink of support.
The rationale appears to make sense. Risk assets reacted negatively when the Federal Reserve increased key rates by 75 basis points at the end of June. Low liquidity “after hours” holiday trading raises the possibility of erratic price changes. Hayes forewarned last month that the mixture may be powerful.
“By June 30 (the end of the second quarter), the Fed will have raised interest rates by 75 basis points and started to reduce its balance sheet. Federal and bank holidays are observed on July 4 since it falls on a Monday.
But thus far, there have been no indications of what Hayes calls a “wild trip to the downside.” Since late last week, the BTC/USD exchange rate has mostly been unchanged.
The cutoff date should be July 5, as the return of traders and their cash may offer the necessary liquidity to stabilize the markets and to purchase any coins that are becoming undervalued in the case of a last-minute fall.
Hayes continued by stating that in June, his earlier predictions of the bottom prices of Bitcoin (BTC) and Ether (ETH) in relation to the US dollar “laid in tatters.”
Mining is becoming more challenging.
Despite significant uncertainty over miners’ capacity to resist the current BTC price decline, the foundations of the Bitcoin network are stable.
The difficulty is not expected to decrease at the impending readjustment this week, which is an outstanding tribute to miners’ commitment to sticking with the network.
The difficulty will barely alter this time around after declining by a tiny 2.35 percent two weeks ago. The difficulty automatically rises and lowers to accommodate for changes in miner activity.
Estimates from on-chain monitoring resource BTC.com indicate that difficulty will further increase if current prices remain unchanged, adding 0.5 percent to a statistic that is still very close to all-time highs.
Opinions hold that when it comes to the miners themselves, it is the less effective players who have been pushed to leave—possibly newcomers with a higher cost basis.
The CEO of asset management Capriole Charles Edwards posted information to social media last week estimating the cost of production for miners collectively to be about $26,000. Electricity makes up $16,000 of that, thus miner overheads have a direct impact on their capacity to reduce losses in the current situation.
In June, Edwards said, “We traded below Electrical Cost, but the floor has subsequently plummeted as inefficient miners concede.”
A sea of misery
It’s nothing new for Bitcoin on-chain indicators to indicate record overselling this year, and especially recently.
The pattern continues in July when the network switches back to situations not seen since the immediate aftermath of the cross-market meltdown in March 2020.
Glassnode, an on-chain analytics company, reports that the amount of coins being spent at a loss is now higher than it has been since July 2020. The weekly moving average of unutilized transaction outputs (UTXOs) in a loss was examined by Glassnode.
On July 3, the proportion of UTXOs that were profitable fell to a two-year low of little over 72%.
There can be some pleasant, albeit seldom, silver linings in down markets. Transaction costs for bitcoin, which were formerly excruciatingly high during bullish bursts of strong network activity, are currently at their lowest level since July 2020. According to Glassnode, the average charge is $1.15.
The same is true for Ethereum network gas costs, as Cointelegraph noted.