BTC Lowest Weekly Close Since December 2020 - 5 Things to Watch About Bitcoin This Week

Bitcoin (BTC) started the new week with a very different feeling, with BTC/USD notching its lowest weekly close since December 2020.

As of the June 13 drop, bitcoin is now approaching a 10-month low from May.

Weakness in cryptocurrencies requires little speculation - shocking U.S. inflation data released last week set off a ripple effect on risk assets, with low liquidity over the weekend seemingly exacerbating the fallout for crypto assets.

The macroeconomic pain continues this week - with the Federal Reserve providing information on rate hikes and broader economic conditions in its first official policy update since inflation data.

Therefore, whether it is Bitcoin or altcoins, the sentiment among analysts – although not unanimously bearish – is one of throwing in the towel. It may have to go through a period of painful trading and hodl before Bitcoin can return to the upside, at least in line with the historical pattern of Bitcoin halving cycles.

What might the markets trigger in the week ahead? Cointelegraph considers 5 things to watch this week from the perspective of a Bitcoin trader.

Celsius 'Crash' Is Looming, Sending Bitcoin Plunge

It was a long shot, but bitcoin finally broke out of the tight trading range it had held since it first fell to a 10-month low last month.

After bouncing off $23,800, BTC/USD has hovered in the $30,000 region for weeks, failing to decide whether to go up or down. Now, while it's not what investors were hoping for, the direction seems clear.

Bitcoin exited more than just a range - as trader and analyst Rekt Capital pointed out on June 12, in abandoning the range near $30,000, BTC/USD also abandoned the macro trading range from early 2021 .

The most recent week's close was around $26,600, Bitcoin's lowest level since December 2020, according to data from Cointelegraph Markets Pro and TradingView.

Economist, trader and entrepreneur Alex Krueger predicts: "​The worst is over. Bitcoin is defending support at $25,000. I think it's time to squeeze a little bit now and sell stocks tomorrow."

An accompanying chart shows a buying support zone at $25,000, locking in a 24-hour decline of 12%.

BTC/USD order data graph (Binance). Source: Alex Krueger/Twitter

Still, markets are in turmoil as I write this, a brutal reminder of what happened when Bitcoin fell below $24,000 in May.

After blockchain protocol Terra’s LUNA and TerraUSD (UST) tokens crashed not so long ago, this weekend it’s the turn of fintech platform Celsius and its CEL token.

CEL, down 40% on the day in dollar terms, was predictably impacted by Celsius’ decision to halt withdrawals and transfers across the board to “stabilize liquidity.”

"Due to extreme market conditions, we are announcing today that Celsius is suspending all withdrawals, exchanges and transfers between accounts. We are taking this action today to allow Celsius to better meet its withdrawal obligations," posted on June 13 wrote in a blog post.

Already skeptical of the altcoin space after Terra’s crash, Bitcoin experts immediately blamed the Celsius event for the extent of Bitcoin’s price losses.

Robert Breedlove, host of the What is Money podcast, said in part comments on Twitter: "Celsius looks like it might crash, taking a huge chunk of client money."

Fed policy update looms on 40-year record inflation

In an already shaky macro environment, the last thing Bitcoin needs is to replicate Terra’s black swan event.

Regardless, fresh turmoil remains possible this week as the Federal Open Market Committee (FOMC) prepares to start its June policy meeting on June 15.

The meeting is expected to accelerate the pace of key interest rate hikes following Friday's 8.6% inflation figure - a policy neither stock markets nor crypto assets welcome.

Like others, Krueger added that the Fed is most likely to be the determining factor in determining the remaining downside for risk assets.

"The bottom has to wait for the Fed (or the stock market) to turn," he wrote.

“Could be a scalping level, but seriously doubt any level would bring about a change in trend by itself. It is very unlikely that the Fed will not turn hawkish on Wednesday, and if it does, it will rebound sharply. More likely, the hawkish acceleration.”

A sell-off in Asian shares at the start of the week took a toll on risk-sensitive currencies such as the Japanese yen and Australian dollar, adding to the pain.

"At some point, financial conditions will tighten enough and/or economic growth will be weak enough that the Fed can Pause rate hikes."

"But we don't appear to be there yet, which means there is an upside risk to bond yields, risk assets remain under pressure and the dollar could be broadly stronger for now."

Bloomberg also reported that a rate hike of 75 basis points could be on the table as the market expects the benchmark rate to reach 3% or higher by the end of the year.

Dollar races to challenge 20-year highs

Where risk assets have suffered, the dollar has played to its fullest over the past two years.

This trend looks set to continue as the macro environment weighs on almost every other currency in the world and risk assets fail to provide a realistic safe haven.

The U.S. dollar index (DXY), despite retreating in recent weeks, has recovered solidly and is now targeting the May high of 105. This reflects the highest strength of the US dollar since 2002, and as of this writing, the US dollar is only 0.5 percentage points away from the peak.

Tony Edward, host of the Thinking Crypto blog, responded: “DXY is strong, no wonder assets are down.”

Since the cross-market crash in March 2020, the strength of DXY has been a reliable counter-indicator of BTC price performance. Therefore, until a major trend change occurs, the outlook for Bitcoin may continue to tilt in favor of the sellers.

Otavio Costa, founder of global macro asset management firm Crescat Capital, said on Twitter on June 12 about the dollar and the Fed's view on inflation: "A stronger dollar tends to lead to a contraction in global corporate earnings. Today's inflation problem is further exacerbated." Margin compression pressure."

"It's only a matter of time before talk of a 'soft landing' turns into cliché 'short-term' bullshit."

US Dollar Index (DXY) 1-day candlestick chart. Source: TradingView

'Misery index' highlights fears in markets

The sentiment in the cryptocurrency market this week will not come as a surprise, as macro sentiment will also turn sour.

The Crypto Fear & Greed Index, which uses a basket of factors to determine the overall health of traders, is hovering on the edge of single digits.

Crypto Fear and Greed Index (screenshot). Source: Alternative.me

Fear and Greed spends most of 2022 in the traditional region of the market bottom, but it has yet to convince anyone that the market may have bottomed.

On June 13, the index stood at 11/100, just 3 points above the March 2020 macro low.

Last week's inflation data also weighed on traditional markets' Fear and Greed Index. The index is now back in "fear" territory at 28/100, according to CNN.

It's not just the financial world that's feeling the pinch - the "misery index" that measures inflation and unemployment is giving what economist Lyn Alden calls "not so good" signals.

"Given where the debt-to-GDP ratio is now compared to the past, it's no wonder consumer confidence is at historic lows," she said, commenting on the Fed data.

Pain index graph. Source: Lyn Alden/Twitter

"Golden opportunity?"

Considering the current situation, it seems that there is no silver lining for the Bitcoin bulls to bring the dark clouds on the horizon.

However, many see this as a golden investment opportunity if the current market landscape is capitalized on correctly.

Among them is Filbfilb, the co-founder of trading suite Decentrader, who called bitcoin a "once-in-a-lifetime opportunity" over the weekend.

He tweeted: "To be clear, while unfortunately the short/medium term problems are prevalent, if you can survive and do the right thing without too much risk, so you don't Funding, it’s a once-in-a-lifetime opportunity in my opinion.”

Like others, Filbfilb pegs BTC’s performance to equities and warns that ordinary holders are turning a blind eye to the “overleveraging” that still exists on exchanges.

"They're going to feel the pressure," he continued.

Analyst Venturefounder also believes that Bitcoin is currently in a four-year halving cycle, and the next few weeks may usher in the greatest pain.

Currently, Bitcoin is halfway through the halving cycle, whereas in similar timeframes in 2014 and 2018, Bitcoin experienced bearish capitulation.