Category: Stocks



BTC price burns bears en route to $40K: 5 things to watch in Bitcoin this week


A surge towards $40,000 brings hope to those who have endured months of bearish drawdowns, but is it enough to continue the bull market?

Bitcoin (BTC) is nearing $40,000 this Monday as a new week gets underway with a bang for bulls.

A calm but confident weekend culminated in a dramatic run-up overnight Sunday, with BTC/USD swiftly nearing the top of its multi-month trading range.

With favorable fundamentals and a lot of liquidated bears, Bitcoin looks set to investigate levels not seen in several weeks.

What could shape price action as the week continues? Cointelegraph takes a look at five factors to consider when charting BTC price action in the coming days.

Bitcoin sets eyes on $40,000

Spot price action is, naturally, the topic on everyone’s radar at present — in 24 hours, Bitcoin has sealed gains of nearly 15%.

While not yet flipping $40,000 to resistance, current levels have not been around since mid June, and appetite for bullishness is palpable.

It began slowly following last week’s “The B-Word” conference, which featured praise of Bitcoin from the likes of Jack Dorsey and Elon Musk.

A breakout was not immediately apparent, however, and progress was slow as analysts remained wary of a market that they thought could still easily collapse to new cycle lows.

In the event, however, Bitcoin slowly inched up through the week, taking out $34,500 over the weekend and opening up the prospect of a run higher.

An impulse move was widely anticipated, including by Cointelegraph contributor Michaël van de Poppe, with potential targets lying within the established medium-term range with $42,000 as its ceiling.

On Monday, however, even van de Poppe appeared taken aback by the veracity of the move higher, calling it a “surprise.”

“After such a move of Bitcoin, altcoins will follow suit,” he predicted on Twitter.

“Some are doing great in their BTC pairs, as Cardano and Ethereum are bouncing nicely. Great!”
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Fellow trader Crypto Ed was more cautious. Highlighting Elliott Wave analysis, he argued that even a return of the bull market would not be without its sticking points, and that $29,000 could still return after $42,000 in line with his previous predictions.

“Doesn't mean we go up in 1 straight line, pullbacks/corrections/retests will happen after we break 42k but new lows are very unlikely to happen once 41.5-42k is broken,” he reasoned Monday.

China dampens stocks sentiment

Bitcoin’s declining relationship to traditional markets is back in the spotlight, making price action look all the more “impulsive.”

Whereas rising stocks have been accompanied by flat or even negative performance in BTC/USD recently, the tables have turned over the past few days. Now, equities are treading water over headwinds from China, while Bitcoin soars.

A crackdown from Beijing has overshadowed previous strength in U.S. markets, and this combined with increasing worries over inflation and central bank stimulus tapering makes for a shaky mood, an analyst told Bloomberg Monday.

“The second half of the year is going to be this glass half-full, half-empty context,” Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors, told the publication’s TV network.

As Crypto Ed continues to stress, meanwhile, the strength of the U.S. dollar is also worth paying attention to in the short term. Currently still on a rebound, the U.S. dollar currency index (DXY) is expected to hit local highs around the 94 mark before falling again, this latter move giving Bitcoin some real breathing space.

Until then, however, DXY could ultimately pressure cryptocurrency markets.

“Expecting DXY to drop more in coming days, BTC should see more relief bounce because of that,” he said Thursday alongside an accompanying chart.

“As tweeted a couple of times before: real strength for crypto returns when DXY completed the move to the red box and goes for the green box.”
DXY chart with target zones. Source: Crypto Ed/ Twitter

"REKT!" Bitcoin brings shorters maximum pain

Is up always good? Not if you’re short BTC.

As commentators were already suggesting recently while BTC/USD was still close to $30,000, the “maximum pain” scenario would likely not be fresh losses, but rather a dramatic reversal to the upside.

That is exactly what happened — the 15% overnight gains took a serious toll on those market participants who were convinced that a crash was incoming.

According to monitoring resource Bybt, 24-hour liquidations totaled $1.1 billion on Monday, the most since May 18. 

“$111,000,000 of shorts liquidated in 10 minutes,” analyst William Clemente added, citing further data from analytics firm Glassnode.

“REKT.”

Bitcoin futures short liquidations chart. Source: William Clemente/ Twitter

It’s far from the first time that bears have been caught unaware — the nature of Bitcoin has ensured time and time again that those who are overly negative ultimately get pushed out.

Difficulty set to turn positive after 2 months

A recovery in Bitcoin fundamentals which has been underway much longer than price continues unabated this week.

Hash rate is approaching 100 exahashes per second (EH/s) again, a positive sign which has been accompanied by increasing decentralization of hash rate overall.

Gains have been brisk over the past week when the hash rate was still lingering near local lows of 83 EH/s. At its height before the price drawdown in May, the hash rate reached 168 EH/s.

A similar story is apparent in network difficulty, which at the time of writing is forecast to increase by around 3.7% at the next readjustment in five days’ time.

If it happens, it will be the first positive difficulty change since May’s mining rout, and a strong signal that the effects of the accompanying upheaval have been mitigated.

Bitcoin difficulty chart. Source: Blockchain

While dubious as a topic, the concept of Bitcoin’s “eco-friendliness” remains an important topic, with large miners leveraging the narrative to reassure skeptical markets of Bitcoin’s longevity.

The statistics speak for themselves — renewable and sustainable energy is increasingly powering the Bitcoin network as miners relocate to suitable jurisdictions.

Record "fear" continues

Those worried that the price gains may be a case of “too much too soon” can take heart in the relatively calm sentiment which has accompanied them.

Related: Top 5 cryptocurrencies to watch this week: BTC, ETH, ICP, AAVE, LUNA

According to the Crypto Fear & Greed Index, the shift towards $40,000 has not changed the overall market mood based on “fear.”

On Monday, the Index measured 26/100 — signaling fear, rather than greed or a “neutral” atmosphere — with the implication that Bitcoin could rise further without investors feeling overly greedy and apt to spark a sell-off.

“Bitcoin fear and greed index has been under 40 for over 2 months - the longest ever time period,” Danny Scott, CEO of exchange Coin Corner, noted last week.

“Yet we're still at $30,000+”
Crypto Fear & Greed Index as of July 26. Source: Alternative.me

The past months have seen “extreme fear” reign, meanwhile, a trait which recently also characterized traditional markets.


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Bitcoin may lose $30K price level if stocks tank, analysts warn


Downside risks for BTC price are also heightened due to the recent dollar bounce.

The ghost of stock market crash is back again to haunt Bitcoin (BTC).

It happened last in March 2020. Back then, the prospect of the fast-spreading coronavirus pandemic led to lockdowns across developed and emerging economies. In turn, global stocks crashed in tandem, and Bitcoin lost half of its value in just two days.

Meanwhile, the U.S .dollar index, or DXY, which represents the greenback's strength against a basket of top foreign currencies, has now climbed by 8.78% to 102.992, its highest level since January 2017.

The huge inverse correlation showed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a better haven: the greenback. 

More than a year later, Bitcoin and stock markets again wrestle with a similar bearish sentiment, this time led by a renewed demand for the U.S. dollar following the Federal Reserve's hawkish tone.

Namely, the U.S. central bank announced Wednesday it will start hiking its benchmark interest rates by the end of 2023, a year earlier than planned.

Lower interest rates helped to pull Bitcoin and the U.S. stock market out of their bearish slumber. The benchmark cryptocurrency jumped from $3,858 in March 2020 to almost $65,000 in April 2021 as the Fed pushed lending rates to the 0%-0.25% range.

Meanwhile, the S&P 500 index rose more than 95% to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown in the chart below.

Bitcoin, Nasdaq Composite, S&P 500, and Dow Jones rose in sync after March 2020 crash. Source: TradingView.com

And this is what happened after the Federal Reserve's rate-hike announcement on Wednesday...

Bitcoin and the US stock market plunged after the Fed's rate hike update. Source: TradingView.com

Meanwhile, the U.S. dollar index jumped to its two-month high, hinting at a renewed appetite for the greenback in global markets.

U.S. dollar index jumped up to 2.06% after rate hike announcement. Source: TradingView.com

Popular on-chain analyst Willy Woo said on Friday that a stock market crash coupled with a rising dollar could increase Bitcoin's bearish outlook. 

"Some downside risk if stonks tank, a lot of rallying in the DXY (USD strength) which is typical of money moving to safety," he explained. 

Michael Burry, the head of Scion Asset Management, also sounded the alarm on an imminent Bitcoin and stock market crash, adding that when crypto markets fall from trillions, or when meme stocks fall from billions, the Main Street losses will approach the size of countries.

"The problem with crypto, as in most things, is the leverage," he tweeted. "If you don't know how much leverage is in crypto, you don't know anything about crypto."

Burry deleted his tweets later.

Some bullish hopes

Away from the price action, Bitcoin's adoption continues to grow, an upside catalyst that was missing during the March 2020 crash.

On Friday, CNBC reported that Goldman Sachs has started trading Bitcoin Futures with Galaxy Digital, a crypto merchant bank headed by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman's call to hire Galaxy as its liquidity provider came in response to increasing pressure from its wealthy clients.

Related: Hawkish Fed comments push Bitcoin price and stocks lower again

Damien Vanderwilt, co-president of Galaxy Digital, added that the mainstream adoption would help Bitcoin lower its infamous price volatility, paving the way for institutional players to join the crypto bandwagon. Excerpts from his interview with CNBC:

"Once one bank is out there doing this, the other banks will have [fear of missing out] and they'll get on-boarded because their clients have been asking for it."

Earlier, other major financial and banking services, including Morgan Stanley, PayPal, and Bank of New York Mellon, also launched crypto-enabled services for their clients.

Is Bitcoin in a bear market? 

Referring to the question "are we in a bear market?" Woo said that Bitcoin adoption continues to look healthy despite the recent price drop. The analyst cited on-chain indicators to show an increasing user growth and capital injection in the Bitcoin market.

He also noted that the recent Bitcoin sell-off merely transported BTC from weak hands to strong hands. 

7-day moving average of coins moving between strong and weak hands. Source: Willy Woo

Woo reminded:

"My only concern for downside risk is if we get a major correction in equities which will pull BTC price downwards no matter what the on-chain fundamentals may suggest. Noticing USD strength on the DXY, which suggest some investors moving to safety in the USD."



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