Bitcoin (BTC) leaves bulls and bears guessing as it opens a new weekly candle in the green, off $ 50,000.
After an uneventful but uninspiring weekend, BTC / USD began regaining USD 53,000 on Monday for the first time since Thursday. What could be in stock?
Cointelegraph examines five factors that could affect BTC price action in the coming days.
BTC / USD 1 week candle chart (Bitstamp). Source: TradingView
Stocks stable but dollar dives
Stocks are cool again this week as the macro image depicts a familiar mix of hope and misery driven by the coronavirus.
While Asian markets had an uneventful day overall, India’s virus troubles and Turkey’s financial troubles were of concern.
Regardless of the United States sending tourists to the European Union this summer, new economic incentives for traders are taking shape.
Without a general direction, however, there is little nudge for Bitcoin to pursue a macro narrative – and the day’s price movements are already proving this.
“What does the future hold?” Tesla and SpaceX “Technoking” Elon Musk summed up on Saturday in a tweet that will be of great importance to many market participants. Tesla, one of the most famous BTC investors, will report on the gains after Wall Street closes.
When it comes to the dollar, the upside for Bitcoin is more likely – the US dollar currency index (DXY) continues to decline after closing below 91 on Friday. As Cointelegraph often reports, the index tends to correlate negatively with BTC / USD, especially in the past year.
BTC recovers the $ 53,000 mark
Bitcoin’s spot price action is already offering surprises, and unlike last week, it’s the bears who are caught unsuspecting.
Data from Cointelegraph Markets Pro and TradingView show that BTC / USD rose to $ 53,000 for the first time since losing the same level on its way down last week.
The level itself is significant, equivalent to a Bitcoin market cap of $ 1 trillion, previously forming a line in the sand that analysts thought would hold up.
In the event, it was $ 46,000 speaking, but there is still no firm belief that the recent drop in prices is over. This can be seen in trading positions as the increase to $ 53,000 liquidated short positions of $ 150 million occurs in one hour.
“It looks like this preliminary sell-off could come to an end,” suspected podcast host Preston Pysh late on Sunday.
The scale of the slump came as a shock to some investors, despite hordes of new buyers entering the network. The on-chain metrics have remained in the green overall, adding further weight to the theory that the current circumstances are a temporary slip in an otherwise persistent bull market.
“The market is very emotional about 2% +/- swings on closes,” Filbfilb, co-founder of the DecenTrader trading suite, told Telegram subscribers last week.
“Note that the volatility will come soon. I’m pretty bullish, but I think we need a little more shake before we get up. Might be wrong … for direction, but not so much for volatility, so buckle up. “
Difficulty set for largest return since November
Basically, miners continue to recover from a power outage in China that saw the network’s hash rate drop overnight in early April.
As a result of the floods, as before in Bitcoin’s life, large chunks of Chinese mining power disappeared from the network, causing the hash rate to drop, which at one point was approaching 25% of its all-time high.
Since then, miners have started to adapt, while a decrease in mining difficulties allows smaller operators to mine more profitably and provide an incentive to maintain network security.
That drop, which will happen in about five days, will be the biggest negative move since November 3rd, when BTC / USD was still at $ 13,000.
7-day average bitcoin hash rate. Source: Blockchain.com
Difficulty adjustments are an essential, if not the most important part of Bitcoin’s ability to maintain itself independent of external factors affecting how it works.
The past few months have been marked by mounting difficulties which, together with the hash rate, have consistently reached new all-time highs. If history continues to repeat itself, price moves should also return to gains in line with their rebound.
Commenting on recent events, Adam Back, CEO of Blockstream, cautioned observers against choosing the statistic resource, arguing that the decline was actually not as large as some suspected.
“The Bitcoin hashrate is 157 EH, about 5% below the maximum of 168 EH. Mostly recovered from 25% at 125 EH, ”he tweeted on Sunday.
The mood tends to be “extreme fear”
Along with shorts and overfunded longs, the irrational feeling in crypto seems to have finally been shaken out.
This is the conclusion reached by the popular Crypto Fear & Greed Index, which uses a number of factors to determine the mood of traders and thus the likely impact of BTC / USD due to their actions.
Previously, as new all-time highs of $ 65,000 surfaced, Fear & Greed was nearing all-time highs in line with the peaks of past bull markets.
At nearly 80/100, a sell-off was clearly planned, according to Metrik, which took about a week to respond to the price drop to $ 46,000.
Now, however, the pressure is gone and the index has moved from “extreme greed” to “fear” – essentially a “reset” of sentiment that leaves room for further price gains.
Analyst highlights price cut “silver lining”
It’s not just private individuals who have seen a serious change in sentiment. By other standards, the erratic behavior of professional traders has also been effectively removed from the market.
In his latest update for the market newsletter from Morgan Creek Digital co-founder Anthony Pompliano on Friday, analyst William Clemente noted that longs had become an attractive bet again.
“There was some silver lining on the event, greed and leverage washed out,” he wrote.
“In addition to the liquidations, this can be illustrated by the financing rates. Funding rates are used to tie the perpetual swap contract to the spot price of bitcoin. When the majority of traders are long, it becomes profitable to be short and vice versa. Funding rates fell negatively during the event, which meant it became profitable for traders to take on the long side of the trade. This has proven to be a buy signal the last two times when this happened during this bull market. “
A “full reset” also approaches the profit ratio (SOPR), a metric Cointelegraph mentioned earlier that tends to determine local market lows.
“Currently, SOPR is nearing the full reset mark, which means that the price has either bottomed out or is very close to the current correction,” added Clemente.