Bitcoin appears to be headed for a decline as a surging US dollar generates scepticism in light of an equally bleak macroeconomic scenario.
Bitcoin (BTC) begins a new week in an uncertain state, confronted by uncertain times – is $40,000 now resistance?
The largest cryptocurrency has recently finished a fourth consecutive red weekly candle, a feat not seen since June 2020.
As bearishness over the macroeconomic future continues to be the norm, there appears to be little to console bulls as the week begins — and Bitcoin is far from finished dropping off.
Following a $4,000 drop in the last four days, price goals have shifted to retesting liquidity levels further towards $30,000.
Not all is doom and gloom – long-term hodlers and key actors such as miners are expressing a more optimistic view of Bitcoin as an investment.
Asia’s difficulties have surpassed the joy of the French election.
At the start of the week, the biggest external event affecting risk assets is the French election, which incumbent Emmanuel Macron won.
Macron’s second term, a breath of relief for market participants anxious about a surprise victory by far-right competitor Marine Le Pen, is expected to buoy French stocks in especially on Monday’s open, as well as the beleaguered euro.
Similarly to the United States, the European Union is confronted by a potent cocktail of inflation and plunging bond markets, with the European Central Bank (ECB) unlikely to take definitive action to hike interest rates or decrease its near $10 trillion balance sheet.
Bitcoin remained unaffected by Macron’s victory, and risk assets are already bracing for an Asia sell-off on Monday as China’s Coronavirus shocks confidence.
Hong Kong’s Hang Seng index is down 3.5 percent on the day, while the Shanghai Composite is down 4.2 percent.
Given that crypto is now highly associated with stock market movements, a repeat performance by Europe and the US would provide obvious directional clues.
“The concern is that the present policy support that the government has put in place may be ineffective as a result of the Covid measures, which have slowed activity,” Jenny Zeng, co-head of Asia Pacific fixed income at global asset manager AllianceBernstein, told Bloomberg.
Even before Monday’s losses, markets commentator Holger Zschaepitz highlighted that the previous week had been difficult for equities.
“Global stocks lost $3.3 trillion in market capitalization this week as US equities – after topping Thursday morning – witnessed a sustained decline as investors appear to reassess their decision to acquire risk assets in an uncertain world,” he warned Twitter followers Sunday.
“Global stock markets are valued $107.6 trillion, or 127 percent of GDP.”
A subsequent post noted that the so-called Buffett Indicator – the ratio of total US stock market valuation to GDP — remained above 100 percent, which he described as “problematic.”
The dollar’s power has returned with a vengeance.
The US dollar is one component of the macro environment that is firmly positive – much to the consternation of crypto traders.
After teetering to two-year highs last week, the US dollar currency index (DXY) currently appears to be continuing its upward trend.
At 101.61 as of this writing, DXY is testing its March 2020 performance, when the Coronavirus crisis drove global assets plunging.
Dollar strength has rarely benefited Bitcoin, and while some have questioned the adverse link, it appears to be firmly in charge this month.
“It appears as though the DXY developer just announced a token burn or something,” popular trader Crypto Ed joked in response to the recent development.
Preston Pysh, presenter of the Investor’s Podcast Network, believes something is wrong.
“We have the Bank of Japan instituting Yield Curve Control at a time when the Yen is falling, and the Federal Reserve is ready to boost 50 basis points at a time when the dollar is setting new highs,” he said Monday.
“Something does feel as if it’s about to snap…”
The weekly chart displays the fourth consecutive red candle.
This Monday, Bitcoin does not appear to be in a good mood. While the weekend remained relatively calm, the weekly close disappointed, coming in barely below last week’s level.
This does mean, however, that there are now four consecutive red candles on the weekly chart, a condition not seen since June 2020, according to TradingView data.
The downturn then continued overnight, with BTC/USD falling below $39,000, where it is currently trading.
Traders are examining numerous chart elements for clues as to the pair’s future direction, although optimistic indications are very few.
According to prominent trader and analyst Rekt Capital, it is the oncoming Ichimoku cloud that would result in significant Bitcoin losses.
During Retest 1 #BTC fake-brokedown from the Cloud before reversing
During Retest 2 $BTC wicked sub-Cloud before reversing
Now retest 3 is in progress
BTC needs to reclaim Cloud as support
— Rekt Capital (@rektcapital) April 24, 2022
Cheds, the popular analyst and creator of Trading Wisdom, was watching for a possible break below the 200-period moving average on the three-day chart.
This would be noteworthy, he said over the weekend, considering the last time this occurred during a bull run was at the 2018 bear market bottom.
“This is not a prediction; it is merely an observation,” he clarified.
Concerning December 2018 and its $3,100 floor, Matthew Hyland, a.k.a. Parabolic Matt on Twitter, provided additional analogies between that era and current Bitcoin price movement.
On a longer time horizon, he noted, having $37,600 on hand is now “critical.”
#Bitcoin comparison of the 2018/2019 Bear Market Bottom compared to the current structure BTC has been in since January of this year
✅Similar Time Frame
✅Series of Lower Highs and Higher Lows
✅Creation of a higher high
✅Pullback after first higher high
Crucial $37.6k Holds pic.twitter.com/kzQhvZUTMr
— Matthew Hyland (@MatthewHyland_) April 23, 2022
“Watching for that sweep down, at which time I’ll look for signs of a relief rally to play off it,” fellow Twitter commentator Crypto Tony added Monday to his own analysis.
Hodlers set a new standard.
Lower timeframe price movement on Bitcoin is uninteresting for all but the most experienced traders due to its “choppy” nature.
As such, it’s unsurprising that the majority of hodlers prefer to remain hands-off and focus on what they do best.
This is now reflected in on-chain data, which indicates that the percentage of the Bitcoin supply that has been idle for at least a year is at an all-time high.
According to economist Jan Wuestenfeld, using data from on-chain analytics startup Glassnode, this results in the supply being “older” overall — proportionately, more coins are being hoarded rather than spent.
According to Glassnode, supply that has been inactive for a year or longer has surpassed 64% for the first time in history.
— Jan Wüstenfeld 🇺🇦 (@JanWues) April 24, 2022
Meanwhile, HODL Waves, a Glassnode indicator that displays hodled coins of various ages, verifies the trend. Since December 2021, the 1-2 year supply slice has increased at a faster rate than any other — from less than 10% in December to about 15% this week.
Additionally, the 3-5 year band of hodled coins expanded its prevalence in Q1.
The fundamentals continue to point toward the moon.
Not just casual diehard hodlers are stubbornly refusing to minimise their BTC exposure in the face of the bleak prognosis.
A look at the fundamentals of Bitcoin’s network reveals that miners are anything but negative when it comes to investing.
A common tale this year, but nevertheless astounding in light of the fact that price is heading in the opposite direction, Bitcoin’s network hash rate and difficulty are both on track to set new all-time highs this week.
Depending on market performance, difficulties should increase upward by approximately 2.9 percent during the next two days, creating a new record of 29.32 trillion.
To emphasise the rivalry for mining participation, difficulty has been added to hash rate — a measure of the processing power allocated to the blockchain — which is already at an all-time high.
Estimates vary by source, but raw data from MiningPoolStats emphasises the hash rate’s “up only” tendency — a critical trigger, some claim, for following positive price performance.
Meanwhile, the trend of increasing hash rate is not new; it has been projected for years as investment continues to expand.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.