Bitcoin has proven to be an asset that can endure current economic storms. The leading crypto is just hanging on to $30,000 as a “bearish divergence” sets the tone. According to traders, BTC price movement faces a probable retracement period after a quiet weekend within its broader bullish trend.
Following a period of relative calm, external triggers for risk assets have returned, with a flurry of US macroeconomic data releases mixed with repeated speeches from Federal Reserve officials. Add to it some intriguing variables around BTC purchase in the United States, and you have a recipe for volatility.
Bitcoin and the crypto industry – The week that was
To look into the future, one has to look into the past. Last week, increased scrutiny of the digital asset industry dragged on investor mood, with Binance dominating the media’s headlines. Investors battled with the impact of central bank monetary policy on the global economy, as recessionary fears, hawkish Fed minutes, and US economic indicators provided a rough week.
In the United States, the FOMC meeting minutes, ADP nonfarm employment change, and ISM Non-Manufacturing PMI statistics reinforced bets on the Fed raising interest rates consecutively in July and September. Rising borrowing prices contributed to the losses from Monday to Friday. The US Employment Report did not affect Fed Fear.
The NASDAQ Composite Index also fell, with the latest US economic data pointing to a rate hike in July ahead of the US CPI Report on Tuesday.
According to the CME FedWatch Tool, the chance of a 25-basis-point Fed rate hike in July was 93.0%, up from 86.8% one week ago. Significantly, the probability of the Fed raising rates to 5.75% in September increased to 24.2% from 20.8% one week earlier.
The excitement that began at the end of June faded in the first week of July. While the markets reacted positively to the news that Blackrock Inc. (BLK), Fidelity, and others had resubmitted their applications, it remained unclear whether the SEC would approve any, some, or all of them.
What should crypto investors expect this week?
That was last week; investors should expect to see Bitcoin tried again this week. Bitcoin may have ended the week at slightly over $30,000, as confirmed by CoinMarketCap data, but its strength suddenly appears less credible.
Following that, a drop into the $20,000 range set the tone for traders, who anticipate that a retracement period could begin before the upswing continues. According to one crypto trader, the downside might be restricted to $29,500, adding to a previous journey to fresh yearly highs the week before.
This week, the Consumer Price Index (CPI) will lead U.S. economic data releases, so macroeconomic analysts will have their work set out for them. The Fed’s hawkishness will be somewhat mitigated if the July 12 CPI reveals a decline in inflation.
After last month’s pause, the markets are near-unanimous that interest rates will rise again, with trend-beating data likely to generate last-minute uncertainty. The Consumer Price Index (CPI) will be followed by the Producer Price Index (PPI) one day later, and eight Fed officials will deliver remarks on the economy and monetary policy.
At the time of writing, the latest data from CME Group’s FedWatch Tool placed the likelihood of a rate hike at 92%, a slight decrease from last week’s figure of 95%.
Bitcoin mining comes into play
In a welcome reversal, Bitcoin network fundamentals are poised to reach new all-time highs within the next few days. The most recent forecasts from BTC.com indicate that network difficulty will increase by more than 5%, the greatest single increase since late March.
Given the lack of price movement, this is significant, as it indicates ongoing competition in the mining industry and growing confidence in future profitability. In doing so, the difficulty will offset its previous decline and reach new all-time highs of approximately 53.2 trillion.
According to some estimates, the hash rate recently surpassed the 400 exahashes per second (EH/s) threshold for the first time. The price of Bitcoin remains more than 50% lower than its peak in 2021, adding credence to the old saying that “price follows hash rate.”
Bitcoin supply hits a hitch
Recent filings for Bitcoin spot price exchange-traded funds (ETFs) in the United States have sparked a purchasing frenzy. As observed over the weekend, US activity has recovered and is now competing with Asia for BTC supply ownership.
According to a study, with only 7.5% of Bitcoin’s immutable 21 million coins available to mine, the ramifications for the shrinking supply become obvious over longer periods.
It’s not just miners who have “confidence” in Bitcoin’s future profitability. According to research firm Santiment this weekend, the largest-volume Bitcoin investor cohorts are eager to buy, even as BTC prices remain dull.
Sharks and whales – entities with between 10 and 10,000 BTC — have boosted their exposure by almost 70,000 BTC since mid-June. This week’s crypto market is one to be watched with careful trades as markets continue to shift.
