Will the central bank prevent the price of BTC from reaching $28K?  - 5 things to know in Bitcoin this week

Will the central bank prevent the price of BTC from reaching $28K? – 5 things to know in Bitcoin this week – Mail Bonus


Bitcoin (BTC) enters the new week with question marks over the fate of the market ahead of another key US monetary policy decision.

After sealing a successful weekly close – the highest since mid-June – BTC/USD is much more cautious as the Federal Reserve prepares to raise benchmark interest rates to combat inflation.

While many hoped the pair could break out of its recent trading range and continue higher, the Fed’s weight is clearly visible as the week begins, adding pressure to the already vulnerable risk-asset sector.

This vulnerability is also showing itself in the fundamentals of the Bitcoin network as the miner load becomes real and the true cost of mining through the bear market is revealed.

Meanwhile, there are encouraging signs from some chain metrics, with long-term investors still refusing to budge.

Cointelegraph takes a look at this week’s potential market entry in a busy week for crypto, stocks and more.

Fed to decide next rate hike in ‘one fun’ week

The story of the week, all things being equal, is undoubtedly the Central Bank’s interest rate hike.

A familiar story, the Federal Open Markets Committee (FOMC) on 26-27 July will see politicians decide the extent of the next interest rate moves. This is considered to be either 75 or 100 points.

Inflation in the United States, as in many jurisdictions, is at a forty-year high, and its rise appears to have taken the agency by surprise as demands for a cap are met with even greater profits.

“Should be another fun one,” says Blockware analyst William Clemente added together on July 25.

The interest rate decision is expected on July 27 at 2:00 PM EST, a calendar date that could well see increased volatility across risk assets.

This could potentially get worse, one analyst warned, thanks to low summer liquidity and a lack of conviction among buyers.

“Entering ECB/FOMC/Tech Gains Amid Lowest Liquidity of the Year.” The market is again overbought. Bulls, let it ride,” Mac10’s Twitter account wrote.

A previous post also reported second quarter earnings reports that could potentially contribute to a decline in line with past behavior.

“BTC and risk assets have pumped higher on FOMC event this year, only to sell off after, is this different?” fellow analysis account Tedtalksmacro continued:

“The June FOMC meeting saw the Fed hike 75 basis points – the largest since 1994. Much more hikes are expected before inflation ‘adjusts’.”

The week already feels different to last, even before events begin to unfold – Asian markets are flat compared to last week’s bullish tone, which followed a resurgence across Bitcoin and altcoins.

While one argument says the Fed can’t raise rates much more without slowing the economy, Tedtalksmacro meanwhile pointed to the labor market as a target to keep hikes going.

“Bitcoin will struggle to go past 28k until data deteriorates,” he added.

The closing price does not reach the moving average

Bitcoin’s most recent weekly close was a half way for bulls, data from Cointelegraph Markets Pro and TradingView show.

Despite managing its best performance in over a month, BTC/USD missed out on retrieving the necessary 200-week moving average (MA) at $22,800.

BTC/USD 1 hour candlestick chart (bit stamp). Source: TradingView

After the close of around $22,500, Bitcoin began to bottom out in its most recent trading range, and was still below $22,000 at the time of writing.

“Watching IF we find support at $21,666 horizontal. Patience,” Anbessa’s popular merchant said Twitter followers in their latest update.

Associate account Crypto Chase, meanwhile, suggested a return to the 200-week MA would lead to a fairly modest upside.

“Cutting around Daily S/R (red box) with inability to turn 22.8K (daily resistance) to support. Many attempts to do so have failed so far,” he said wrote along with explanatory tables:

“If prices rally again and find acceptance, I will look at 22.8K to become support for a potential long entry to 23.2K.”

Later update the eyes $21,200 as a potential bearish target, this also forms a support/resistance level on the daily chart.

At $21,900, however, Bitcoin is still about $1,200 higher compared to the same level a week ago.

BTC/USD 1-week candlestick chart (bitstamp) with 200-week MA. Source: TradingView

Elsewhere, the latest price action was not enough to change the long-term outlook. For Venturefounder, a participant at on-chain analytics company CryptoQuant, a macro bottom was yet to emerge, this could potentially be as high as $14,000.

“Consistent with the last halving cycles, this is still my most realistic prediction for Bitcoin for the next halving: BTC will give up in the next 6 months and bottom out (anywhere between $14-21k), then cut to $28-40 thousand for most of 2023 and be at ~$40k again at the next halving,” retweeted forecast originally from June repeated.

Difficulty returns to March level

In a sign that miners’ troubles due to price weakness may only be beginning, upheaval is now visible on the Bitcoin network.

Difficulty, the measure of competition among miners that adjusts to participation, has been declining since late June and is now back at levels not seen since March.

The latest adjustment was particularly notable, hitting 5% of the overall difficulty and heralding a change in the way miners operate. This was the biggest single drop since May 2021, and the next one, due in ten days, is now expected to take difficulty down by 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, the need to stay afloat remains a concern, data shows. According to CryptoQuant, miners sent 909 BTC to exchanges on July 24 alone, the most in a single day since June 22 and a 5% difficulty reduction.

A turnaround for miners is therefore out of sight this week.

Overview of Bitcoin Network Basics (screenshot). Source: BTC.com

As Cointelegraph additionally reported, it’s not just the BTC price that’s causing trouble for miners in the current situation.

Congratulations on your MVRV-Z score

One of the hottest on-chain metrics in Bitcoin has crossed what is probably its most important level – zero.

On July 25, Bitcoin’s MVRV-Z level returned to negative territory after a short week above, thus falling into the area usually reserved for macro price bottoms.

MVRV-Z shows how overbought or oversold BTC is compared to “fair value” and is popular thanks to its uncanny ability to define a price floor.

Its return could signal a new era of price pressure, with bottom-catching accuracy having a two-week margin of error.

In early July, Cointelegraph reported on MVRV-Z and suggested a worst-case scenario of $15,600 for BTC/USD this time around.

Sentiment cools from four-month high

For the crypto market, the past week may well have been a brief period of irrational exuberance if 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 stands at 30/100 – still described as “fear” driving sentiment overall but still five points above the “extreme fear” spasm where the market previously spent a record 73 days.

The sensation has nevertheless made quite a comeback since mid-June when Fear & Greed hit some of its lowest scores ever, just 6/100.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views and opinions expressed here are solely those of the authors and do not necessarily reflect the views of Cointelegraph.com. Every investment and business involves risk, you should do your own research when making a decision.