A potent combination of CPI numbers and other factors contribute to a difficult week for the Bitcoin price, which struggles.
Bitcoin (BTC) begins a new week in a precarious position near $20,000 in anticipation of further macroeconomic turmoil.
Despite having posted its highest weekly gains since March, the largest cryptocurrency is battling to maintain its recently regained levels.
Due to the impending release of inflation statistics later this week, the coming days may be unsettling for risky assets.
Moreover, crypto market sentiment is exhibiting indications of improvement, and on-chain indicators continue to support what should be Bitcoin’s most recent macro price bottom.
The 200-week moving average results in headaches.
BTC/weekly USD’s finish on June 10 was unremarkable at approximately $20,850, but the pair posted its largest weekly gain in some months.
Bitcoin’s position at the end of the week was $1,600 higher than it was at the beginning of the week, a development not witnessed since March.
However, the success was short-lived, since the hours after the weekly close were negative. According to TradingView statistics, BTC/USD was eyeing $20,400 at the time of writing.
Bitcoin’s ability to maintain current levels could be crucial in determining the sentiment this summer, as relief on global stocks would present an opportunity for crypto to recoup some of its recent losses.
Analysts, including trading suite Therefore, Decentrader viewed the weekly chart with keen attention.
Weekly look on $BTC futures. Current candle is set to close on a bullish engulfing bar above the Moonraker and weekly vwap. Momentum is turning up as well. If stocks continue to turn up and have a summer rally $BTC and crypto should likely follow. https://t.co/tlkrnTsG33
— Decentrader (@decentrader) July 10, 2022
Others were less optimistic, noting that BTC/USD had once again closed below the 200-week moving average (WMA) at approximately $22,500.
In prior bear markets, the 200 WMA served as a general support level, with Bitcoin momentarily dipping below it to establish macro bottoms. This time appears to be different, as $22,500 has not been on the chart for a month.
#BTC weekly candle has rallied +15% but is still holding resistance under the 200MA for 3 weeks.
Lower time frames are a bit more bullish, indicators are cooling off but markets remain fearful.
Will #Bitcoin break back above the weekly 200MA before the weekly close?👀 pic.twitter.com/NZXbxK8Oi2
— Steve Courtney ~ Crypto Crew University🤓📈 (@CryptoCrewU) July 8, 2022
Popular trader TechDev endorsed a more bullish picture for the remainder of 2022 as we zoom out.
He suggested over the weekend that Bitcoin’s “reaccumulation phase” will terminate entirely before the end of the year if additional significant WMAs are reclaimed.
“BTC flipping between 32,000 and 35,000 certainly marks the conclusion of reaccumulation and this year-plus downturn,” TechDev tweeted.
“Most likely to occur if both the 100W and 50W EMAs are within this range. 100W is present at 34.8K, and 50W is at 37.2K.”
Elsewhere, the ongoing asset liquidation of the troubled cryptocurrency loan site Celsius increased to the selling pressure.
Celsius continues to send its remaining cryptoassets to exchanges. Few hours ago, 2,000 wBTC was transferred from the main wallet, and after a series of hops eventually hit Coinbase and Binance.
Remaining key assets:
410k stETH ($479mm)
16k wBTC ($342mm) pic.twitter.com/ae6viYL1Jk
— light (@lightcrypto) July 10, 2022
The unrelenting dollar returns as Asian stocks decline
As news of social upheaval in China clouded the opening of the macro week on July 11, Asian equities declined.
As demonstrators demanded the release of blocked cash in the wake of a scandal involving banking executives and municipal authorities who were suspected of misusing COVID-19 surveillance software, the markets felt the strain.
At the time of writing, the Shanghai Composite Index was down 1.5% while the Hong Kong Hang Seng was down 3.1%.
Europe fared considerably better, with minor gains for the FTSE 100 and Germany’s DAX, while the U.S. market had not yet opened.
Prior to Wall Street’s return, the U.S. dollar index (DXY) had already made new gains, erasing a setback that had contributed to a cooler close to last week.
On 11 July, DXY stood at 107.4, just 0.4 points away from twenty-year highs set days before.
In terms of year-to-date rise, one analyst at the trading firm The Rock described DXY as “about as extreme as it gets.”
“Based on this year’s spectacular surge to date, the DXY is already up 16% year over year,” he added.
Historically speaking, this is as bad as it gets, and it often coincides with major financial stress in the markets, a recession, or both.
Last week, Bitcoin defied its typical inverse link with DXY by rising with the index.
Inflation was predicted to produce a “messy week.”
As if that weren’t enough, the age-old problem of inflation is likely to test the durability of the market this week.
The U.S. Consumer Price Index (CPI) reading for June is expected to be even higher year-over-year when it is released on July 13.
The higher inflation is, and the further it deviates from these already elevated expectations, the more risk assets tend to respond in anticipation of a policy response.
Alex Krueger, a macro expert, sees a clear trend for the week ahead.
On Twitter, he predicted, “It’s going to be a mess.”
Themes this week
#1 CPI Inflation. Consensus is higher: 8.8% yoy, 1.1% mom. My view: comes in even higher, large dip gets bought.
#2 Earnings. Mostly financials this week. Should be OK.
#3 European gas crisis. Exerts downwards pressure on risk and the euro.
Going to be messy. https://t.co/LCmt2GRcHl
— Alex Krüger (@krugermacro) July 10, 2022
CPI, while excluding a large number of leading inflation indicators, drew the attention of mainstream commentators over the weekend, suggesting that this week’s statistics may throw the cat among the pigeons.
“As next week’s US CPI inflation figure may approach 9 percent, some will be quick to point out that this is a lagging indicator,” said economist Mohamed El-Erian.
Yes…but it captures the suffering of many, especially the less fortunate portions of society, and influences inflation predictions.
In the meantime, any knee-jerk reaction might clearly frighten Bitcoin markets in line with other risk assets, or at the very least generate significant volatility, as shown with prior CPI incidents.
MACD indicates that a price bottom is imminent.
Multiple Bitcoin price indices are either flashing “bottom” or hitting all-time lows, indicating that a BTC investment at current prices has an unequalled risk-to-reward ratio historically.
This week, the moving average convergence/divergence (MACD) on the weekly chart is the newest addition to the herd.
MACD efficiently follows an existing trend on a chart. Subtracting the 26-period exponential moving average (EMA) from the 12-period EMA is required.
Bitcoin tends to be in a bottoming scenario when the final value is below zero, therefore the current drop below $17,600 could be indicative if past patterns repeat.
A #Bitcoin capitulation of price, when the weekly MACD is below the zero-line, has always marked the bottom. pic.twitter.com/5U1Q13Ybju
— dave the wave🌊🐫 (@davthewave) July 10, 2022
In the meantime, analyst Matthew Hyland observed a similar MACD formation on the 3-day chart.
“The 3-Day MACD remains on a positive cross,” remarked market expert Kevin Svenson.
Despite the pullback, I continue to hold an optimistic outlook for the medium term.
Bitcoin’s relative strength index (RSI) has already reached its highest historically “oversold” levels.
In the meantime, a trader predicted the 15th of July as the day by which another chart feature, this one comprised of two independent MAs, will call the bottom.
Crypto Fear & Greed Index reaches two-month highs
As a minor silver lining, the recent data indicates that the average crypto investor is progressively regaining trust.
The crypto market mood reached its highest level since the beginning of May over the weekend, reaching 22/100.
While still in “severe dread” area, the Crypto Fear & Greed Index’s resurgence provides a stark contrast to the events of the preceding two months, during which it fell as low as 8/100 — below even some prior bear market bottoms.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.