Bitcoin faces another week of “huge” macro announcements after posting its lowest weekly close since July.
BTC/USD has slumped for several days following the release of the latest U.S. inflation data and, like altcoins and risk assets more broadly, has failed to recover.
Bitcoin has yet to turn $20,000 into a convincing support level, and that level could become resistance again as the third week of September begins.
The bulls have a lot to worry about - in the coming days, the Federal Reserve will decide on the next key rate hike, which will affect markets far more than sentiment.
Additionally, the fallout from the ethereum merger continues, while the repayment of creditors by defunct exchange Mt. Gox adds another potentially dark cloud to the bitcoin price outlook.
Cointelegraph analyzes five potential factors affecting the bitcoin market to watch in the coming week.
Fed rate hike 'hit' in focus
The main event of the week is the Federal Reserve's decision on key interest rates.
The Fed will be under pressure to respond after August consumer price index (CPI) results came out "hotter" than expected.
Therefore, according to the data of CME FedWatch Tool as of September 19, the market has fully digested the expectation that the Fed funds rate will increase by at least 75 basis points, and has not ruled out the possibility of raising interest rates by 100 basis points.
A 100 basis point hike would be the Fed's first hike of this magnitude since the early 1980s.
Fed target rate probability map as of September 19, 2022 Source: CME Group
The Federal Open Market Committee (FOMC) will meet on September 20-21 and will issue a statement confirming the rate hike and the Fed's support for the numbers.
"It's typical human nature that the Fed isn't going to ease monetary policy anytime soon because now we have the benefit of knowing how much they've done wrong with over-easing monetary policy," Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said in an interview with Kitco over the weekend. mistake."
Growth in risk assets since the March 2020 crash has been "too sideways" and it is now "very clear" that a reversal will happen, he said.
McGlone went on to say that cryptocurrencies will play a role in the overall market reset, with Bitcoin ultimately taking the lead, reiterating a long-held theory about the future of cryptocurrencies. Gold will also do well, but for both, pain comes first.
Central banks outside the U.S., initially slow to start raising rates to fight inflation, are trying to speed up the process.
Meanwhile, Games of Trades, a popular Twitter analytics account, said it was a pivotal moment for the S&P 500 before trading on Wall Street began.
Analyst and commentator Kevin Svenson added : “In this case, with significant uncertainty, the crypto market can’t do much without the permission of stocks.”
Spot prices dip after weak weekly close
Over the past week, the price of Bitcoin has been trending downwards.
BTC/USD fell more than $2,000 in a week, closing below $20,000, its lowest close since July, according to data from Cointelegraph Markets Pro and TradingView.
BTC/USD weekly candle chart (Bitstamp) Source: TradingView
After the close, the pair fell sharply below $19,000.
BTC/USD 1-hour candle chart (Bitstamp) Source: TradingView
This bearish sentiment is perhaps understandable - the Ethereum merger became a " sell when confirmed " event and, along with macro triggers, led to a new risk-on flight.
Now, analysts are considering the possibility that the downtrend remains intact, at least until the Fed rate announcement.
On-chain analysis resource Material Indicators told Twitter followers in a Sept. 18 post: “BTC has had the weekend, but there is always the possibility of some volatility before the close.”
"Next week there's a big Fed announcement that's going to make things tricky again."
The accompanying chart shows Binance’s order book situation, with support at around $19,800 as it failed to sustain price action.
A day earlier, Material Indicators deduced that the scenario of avoiding a deeper decline was likewise moot. Judging by the order books, buying activity is still not strong enough to support current levels.
Meanwhile, well-known trader Cheds has placed bets on the fourth quarter of this year, saying Bitcoin is "on the right track" given the likely timing of a macro bottom.
“BTC weekly close starts approaching range lows,” he added in another tweet about the weekly close.
At the time of writing, both Binance and FTX are seeing increased short positions, suggesting a concerted effort by derivatives traders to drive down the market. Another popular account, Ninja, doesn't think that will ultimately pan out after Wall Street opens.
Dollar falls below multi-decade peak
Meanwhile, keeping a close eye on potential macro highs is the dollar, which has rebounded from losses following the CPI release.
A typical headwind for cryptocurrencies, the U.S. dollar index (DXY) is currently trading just below 110, having consolidated for several days.
The index touched 110.78 earlier this month, its highest since 2002 , and has not seen a sharp pullback.
Analyzing the near-term, Hyland warned last week that the U.S. dollar index will see a "new peak" with a "capitulation event" in risky assets.
At the same time, looking at the inverse correlation between the U.S. dollar index and BTC/USD can confirm the impact of the former's sharp rise on the latter.
US Dollar Index (DXY) vs BTC/USD 1-day chart Source: TradingView
Ethereum in post-merger blues
Within a week of the merger, Ethereum was experiencing a massive post-hype decline.
ETH/USD fell 25% last week, a move that could re-bias market cap share in favor of Bitcoin.
The pair is currently trading below $1,300, its lowest level since July 16, with analysts and traders generally making bearish forecasts.
ETH/USD 1-hour candlestick chart (Binance) Source: TradingView
"Ethereum failed to hold key support levels," Svenson warned .
Analyst Matthew Hyland also gave ETH/USD a $1,000 price target , adding that $1,250 "should hold steady as a support level."
Ethereum fell 19% against BTC last week, and Bitcoin’s share of the overall cryptocurrency market capitalization has risen 1.2% since Sept. 14.
However, well-known trader CryptoGodJohn believes that despite this, everything is providing an opportunity for a "generational entry" of the currency pair.
Samson Mow, CEO of Bitcoin adoption startup JAN3, was less enthusiastic, noting that while ETH/USD is still above its 200-week moving average (WMA) at current levels, Bitcoin is already below its 200-week moving average (WMA) moving average.
The 200 WMA is an important trendline during crypto bear markets, and historically, reclaiming this trendline after a loss of support signifies a return of momentum.
Dormant Bitcoin Supply Continues to Aging
On-chain data confirms that holders have maintained their resolve even as recent price volatility has led to a rise in on-chain activity.
According to analytics firm Glassnode, bitcoins held for at least 5 years show only one trend — an increase.
In the latest data for the day, Glassnode confirmed that the percentage of BTC supply last active in September 2017 or earlier reached an all-time high of 24.8%.
Chart of Bitcoin supply percentages recently active over 5 years ago Source: Glassnode/Twitter
At the same time, the supply that was last active 5 to 7 years ago reached its highest value in nearly two years - 1.01 million BTC.
Bitcoin supply chart last active 5-7 years ago Source: Glassnode/Twitter
Meanwhile, Bitcoin, which was last active 6-12 months ago, also reached its own 5-month high of 2,208,460.681 BTC.
Still, when it comes to Bitcoin, the long-term trend of seasoned investors is evident, as can be seen in the portion of supply held by long-term holders (LTH).
Glassnode explained last week: "LTH supply refers to the number of bitcoins that have been dormant for 155 days. From the data point of view, they are the least likely to be consumed during market fluctuations." At that time, the indicator hit 13.62 million bitcoins. record high.
Following the CPI event, Bitcoin inflows into exchanges reached their largest single-day record in months, Cointelegraph reported .
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