Bitcoin (BTC) still starts a new week in holiday mode as United States financial markets are on lockdown for Independence Day.
The largest cryptocurrency, stuck below the increasingly disheartening $20,000 level, continues to feel the pressure from the macro environment as talk of lower levels remains omnipresent.
After a quiet weekend, Hodler finds himself range-bound as the prospect of a breakout to the upside becomes harder to believe.
As one trader and analyst highlights July 4th as the scene of a “wild run down” for crypto markets, Bitcoin is counting down to weathering the fallout from the Federal Reserve’s recent rate hike.
What else could the coming week bring? Cointelegraph takes a look at the potential market-moving factors for the coming days.
BTC price waits over the long weekend
Bitcoin made it through the weekend unscathed, but the classic pitfalls of off-peak trading remain.
The United States will not return to the trading tables until July 5th, which meanwhile offers ample opportunity for some classic price action over the weekend.
So far, the market has been restrained in terms of volatility – with the exception of a brief surge to $18,800, BTC/USD has been circling the $19,000-$19,500 range for several days.
Even the weekly close brought no real reversal, data from Cointelegraph Markets Pro and TradingView showed, with the psychologically significant $20,000 unchallenged.
“Below the range low, we can expect a drop to $18,000,” according to popular trading account Crypto Tony repeated to Twitter followers as part of a new update on July 4th:
“It’s been a very dull few days in the markets and that’s a classic for a middle class.”
In terms of downside targets, others have continued to eye the $16,000 area.
In 2018, The Orange MA brought up the rear. In 2020, The Green MA brought up the rear. Currently holds Green MA (16-17K). If it breaks there is a possibility of the next lower blue MA (12-13K) $BTC pic.twitter.com/rZILTAOlXf
— Trader_J (@Trader_Jibon) July 3, 2022
Meanwhile, with no significant bitcoin futures gap and flat performance in Asian markets, there was little short-term price targets for short-term time-frame traders.
The US dollar, meanwhile, continued to hold near 20-year highs after defiantly bouncing back from its last retracement.
The US Dollar Index (DXY) is above 105 at the time of writing.
Gold nears ‘blast’ against US stocks
With Wall Street closed for Independence Day, US stocks can take a breather on July 4th.
However, for a popular chartist, attention is focused on stocks’ strength versus gold (XAU) in the current environment.
In a Twitter thread, gold monitor Patrick Karim specifically pointed out that the precious metal is on the verge of hitting an historic “blast” zone against the S&P 500 (SPX).
After bottoming out in late 2021, the gold/S&P ratio has rallied over the year and is now on the verge of crossing a border, which has led to a significant uptrend in the past.
“Gold nearing ‘blast zone’ against US stocks. Previous launches have unlocked important gains for Silver & Miners,” commented Karim.
On a US dollar basis, the situation cannot be said to be the same as USD strength has kept XAU/USD firmly in place below $2,000 since March.
For silver fans, however, this means that even a modest break in the XAU/SPX ratio will yield significant returns.
Note that price does not require you to return to previous 2011 highs #Gold versus #spx Relative to MUCH higher nominal silver and miner prices.
Think about it for a moment.
— Patrick Karim (@badcharts1) July 3, 2022
The forecast again questions the extent of Bitcoin’s ability to break macro trends. A breakout against BTC for gold would be the natural follow-up should Karim’s scenario materialize thanks to the ongoing correlation with stocks.
“After escaping the sideways pattern that had formed over a 1.5-year period, the correlation coefficient rose sharply to 86% versus the S&P 500,” according to popular trader and analyst CRYPTOBIRB summarized over the weekend:
“It now remains strongly positive with a ratio of 0.78.”
Analyst Venturefounder noted that Bitcoin remains tied to Nasdaq movements.
In the meantime #Bitcoin and #NASDAQ are still trending together.
Note that this is how previous lows (December 2018 and March 2020) expired #BTC and $QQQ Correlation at the peak, suggesting that the macro has always been affecting BTC lows. Rather, we can predict that the macro will herald the bottom for BTC again this time. pic.twitter.com/szmS4c6WV8
— venturef◎undΞr (@venturefounder) June 26, 2022
Against the dollar, meanwhile, Cointelegraph reported that bitcoin’s inverse correlation is now at a 17-month high.
Crunch time for Hayes’ ‘wild ride offside’
The 4th of July, aside from being Independence Day, is viewed by one market participant in particular as a holiday like no other – at least for Bitcoin.
With markets closed and BTC price action already teetering on the brink of support, Arthur Hayes, former CEO of derivatives platform BitMEX, has highlighted this long weekend as a long day of reckoning for the crypto markets.
The reasoning seems logical. In late June, the US Federal Reserve raised interest rates by 75 basis points, providing fertile ground for a negative reaction from risky assets. Holiday trading with low “off-hours” liquidity increases the potential for volatile price moves up or down. Combined, the cocktail could be strong, Hayes warned last month.
“By June 30th (end of the second quarter) the Fed will have issued a 75 basis point hike and started to shrink its balance sheet. July 4th falls on a Monday and is a federal and bank holiday,” he wrote in a blog post:
“This is the perfect setup for another mega crypto dump.”
So far, however, there have been no signs that what Hayes says will be a “wild ride to the bottom.” BTC/USD has remained virtually unchanged since late last week.
The deadline should be July 5 as returning traders and their capital could provide the liquidity needed to calm markets and buy up cheap coins at the last minute in the event of a downturn.
Hayes added that his previous predictions of BTC/USD bottoming at $27,000 and Ether (ETH)/USD at $1,800 were “in shambles” back in June.
Mining difficulties are still increasing
Despite significant concerns about miners’ ability to withstand the current drop in BTC price, Bitcoin’s Network fundamentals remain calm.
A stunning testament to miners’ determination to stay on the network, the difficulty not set to be eased in this week’s forthcoming rebalancing.
After a modest 2.35% drop two weeks ago, the difficulty, which automatically rises and falls to reflect fluctuations in miner participation, will change little this time.
According to estimates by on-chain monitoring resource BTC.com, the difficulty will increase even if current prices stay the same, adding 0.5% to a metric still close to all-time highs.
When it comes to the miners themselves, opinions are that it’s the less efficient players – possibly higher cost base newbies – who have been forced out.
Data uploaded The CEO of asset manager Capriole, Charles Edwards, took to social media last week to put the production cost of the bulk miners at around $26,000. Of that, $16,000 is accounted for by electricity, meaning miners’ overheads directly impact their ability to limit losses in the current environment.
“We traded below electricity costs in June, but the bottom has since fallen as inefficient miners capitulate,” noted Edwards.
A sea of depths
Bitcoin on-chain metrics point to this Record overselling is nothing new this year and especially in recent weeks.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, SHIB, MATIC, ATOM, APE
The trend continues in July as the network returns to scenarios not seen since the aftermath of the March 2020 cross-market crash.
According to on-chain analytics firm Glassnode, the number of coins spent at a loss is now the highest since July 2020. Glassnode analyzed the weekly moving average of unspent transaction outputs (UTXOs) at a loss.
Similarly, UTXO’s percentage of earnings hit a two-year low of just over 72% on July 3.
Bear markets can produce some welcome, albeit rare, silver linings. Bitcoin transaction fees, once painfully high during bullish times of intense network activity, are also now at their lowest since July 2020. The median fee, according to Glassnode, is $1.15.
As Cointelegraph reported, the same is true for Ethereum network gas fees.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.