bitcoin (BTC) enters a new week with a question mark over the fate of the market ahead of another key monetary policy decision in the United States.
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 that 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 moves 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 the size of the next interest rate move, which is expected to be 75 or 100 basis points.
US inflation, as in many jurisdictions, is at its highest level in forty years, its rise seems to have taken the establishment by surprise as calls for a spike are met with even bigger gains.
“That should be another fun,” William Clemente, chief analyst at Blockware. abstract July 25.
The interest rate decision is due July 27 at 2 p.m. EST, a date that may well come with heightened volatility in risky assets.
This has the potential to be exacerbated, an analyst warned, thanks to low summer liquidity and 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, meanwhile, Tedtalksmacro has singled out the job market as a target to hold the rises ahead.
“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 bullsdata 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.
hello legends
High end dump during the night session on $ETH and $BTC ..
Looking for relief if we can hold $1460 on $ETH and $21,700 on $BTC
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.
Meanwhile, another account, Crypto Chase, suggested that a return to the 200-week MA would lead to an even more modest upside.
“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 was looking at $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, contributor to on-chain analytics firm CryptoQuant, a macro background hadn’t appeared yet, it could be 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 of 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.
Difficultythe measure of competition among minors, which adjusts for participation, was decline since late June and is now back 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.
For now, however, the need to stay afloat remains a concern, according to the data. According CryptoQuantminers sent 909 BTC to exchanges on July 24 alone, the most in a day since June 22 and a 5% decrease in difficulty.
A turnaround for the miners therefore remains out of sight this week.
Like Cointelegraph additionally reportedit’s not just the price of BTC that’s 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.
July 25, Bitcoin MVRV-Z score moved back into negative territory after a brief week above, falling into the zone usually reserved for macro price lows.
#Bitcoins $BTC MVRV Z-Score just crossed 0.
Before: 0.010 -> Now: -0.000
Show 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.
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 and 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” driving the general mood, but still five points above the “extreme fear” band in which the market previously traded. save 73 days.
Sentiment has nevertheless made a big comeback since mid-June, when Fear & Greed hit some of its lowest levels ever in just 6/100.
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