Bitcoin (BTC) is heading into a new week after snapping the longest weekly downtrend in its history, and holders finally have some renewed hope.
After battling for support throughout the weekend, BTC/USD finally found support, closing at $29,900, $450 higher than last Sunday.
The bullish momentum didn’t stop there, with the BTC/USD pair climbing to multi-day highs overnight on June 6.
Price action has brought some long-awaited relief to bulls, but Bitcoin is far from out of the woods in this fresh start of the week.
Perhaps most important will be U.S. inflation data, which itself is a gauge of global macroeconomic strength. Over time, the impact of anti-epidemic policies, geopolitical tensions, and supply shortages has become increasingly apparent.
Many are still unlikely to bet on risky assets amid widespread perceptions that tightening central bank monetary policy will weigh on stocks and cryptocurrencies.
At the same time, Bitcoin’s network fundamentals continue to adapt to the surrounding reality and its impact on network participants.
Cointelegraph has focused on these five factors as it charts Bitcoin’s price action over the next few days.
It was long overdue, but Bitcoin has finally had an “up” week on the weekly chart.
BTC/USD is on a nine-week losing streak — a trend that began in March and culminated in the longest losing streak in Bitcoin’s history.
However, on June 5, the bears lost their chance, pushing the BTC/USD pair to $29,900 before the start of the new week, which is still around $450 above the previous week’s close.
The event sparked hours of gains that totaled a local high of $31,327 on Bitstamp as of this writing — Bitcoin’s best performance since June 1.
While some celebrated Bitcoin’s newfound strength, others were calm about the prospect of further significant gains.
Cointelegraph contributor Michaël van de Poppe has been eyeing a gap in CME futures since the weekend, which could lure BTC/USD back to $29,000.
"I'm still predicting the same for Bitcoin," he told followers on Twitter.
"The CME gap down to $29,000 is very plausible, before briefly reversing to $31,500."
A look at the order book data reinforces the friction bulls may face in a sustained breakout. At press time, Binance alone had over $60 million in sell-side liquidity in this roughly $32,000 area.
BTC/USD Order Book Data Chart (Binance) Source: Material Indicators
Twitter analysis account Il Capo of Crypto believes that there is also little confidence. This account is known for its dispassionate analysis of upcoming Bitcoin price movements.
Still, the market is not without optimism.
"Having a plan is more important than guessing in the right direction," said the popular Twitter account IncomeSharks.
"I think we're going to go down and up, so if that happens, I'll be looking forward to it. If it opens higher, we might bounce back, and I'll turn to other coins and let them go up. Currently TP levels are at $34,000. "
U.S. inflation is at its highest level since the early 1980s, but will it last?
Markets will find out this week with May consumer price index (CPI) data due out on June 10.
As one of the benchmarks to measure the progress of inflation, the release of CPI data has historically been accompanied by market volatility both inside and outside of cryptocurrencies.
The question for many is how much more oil prices can rise as the Russia-Ukraine conflict and its impact on global trade and supply chains continue to unfold.
In the U.S., Fed rate hikes were also closely watched as prices soared.
The end of the era of "easy money" is a difficult time for stocks and related crypto assets, and regardless of how inflation behaves, this painful trend is not expected to end anytime soon.
"Market liquidity is decreasing, which means it will have an impact on the stock market," Charu Chanana, market strategist at Saxo Capital Markets, told Bloomberg.
“We do expect that there is still some downside for equities.”
Chanana's comments came as Asian markets rallied in trading earlier in the week, led by China's easing of the latest round of coronavirus lockdown measures.
At press time, the Shanghai Composite was up 1.1%, while Hong Kong’s Hang Seng was up more than 1.5%.
However, outside of the intraday data, sentiment is pretty jittery when it comes to macro currencies versus cryptocurrencies.
Trading firm QCP Capital sees the recent contraction in the U.S. M2 money supply - the third in about 20 years - as another reason not to take risks.
"The contraction in M2 is the result of Fed rate hikes and forward guidance, which has fueled a surge in reverse repos (RRP) to record levels. Banks and money market funds are pulling money out of the financial system to park it with the Fed, Thus taking advantage of high overnight rates,” QCP Capital wrote in the latest installment of its Crypto Circular research series.
“The unwinding of QT’s balance sheet from June 1 will only exacerbate this liquidity drain. We expect these factors to weigh on cryptocurrency prices.”
Bitcoin miners have so far refrained from selling their coins en masse despite weeks of lower prices jeopardizing its cost base.
New analysis argues that this could soon change, triggering a situation that has historically accompanied bitcoin price bottoming generation after generation.
In a tweet on June 6, Charles Edwards, founder of crypto asset management firm Capriole, highlighted a classic bottom signal in the Bitcoin hashband indicator.
Hashbands, a measure of miner profitability, have historically correlated fairly accurately with price phases. Currently, a "capitulation sell-off" phase similar to March 2020 is underway, but holders should never sell, he explained.
“Hashbelt miner capitulation is imminent. Bitcoin mining margins are being squeezed,” Edwards commented.
“Reminder: This is not a sell signal. The end of the capitulation period has historically created some of the best long-term buying opportunities in Bitcoin.”
Previously, Cointelegraph reported on the challenges miners are facing, including New York state’s ban on mining this month.
Fluctuations in miner participation will have a noticeable impact on Bitcoin's hash rate and network difficulty.
Estimates suggest that the hash rate has held steady above 200 exhash per second (EH/s) so far, suggesting that the majority of miners are still active and have not reduced their activity due to cost concerns.
Data covering the bitcoin network's woes also paint a calmer short-term picture.
In this week’s upcoming automatic adjustment, the difficulty will drop by less than 1%, again reflecting the relative lack of volatility in the mining space.
That compares with a 4.3% drop in the previous correction two weeks ago, the biggest reversal since July 2021.
Outside of the short term, some prominent commentators on Bitcoin are generally optimistic.
Podcast host Robert Breedlove pointed out in a Twitter debate on June 5: "As we can see from the growth of hash rate, Bitcoin is about 50% cheaper today than it was a year ago, but it is cheaper than a year ago." 20% stronger year ago.” He sees this as showing a “mobilization” of entrepreneurs interested in fueling bitcoin’s growth.
In a word, bitcoin’s biggest investors may have followed through on their promises this month.
As noted by market sentiment monitoring firm Santiment, entities controlling 1,000 or more bitcoins now own more bitcoin supply than at any point in the past year.
“Bitcoin whale addresses, including some transaction addresses, have the highest bitcoin supply of the year,” Santiment concluded on June 6.
“We routinely analyze 100 to 1,000 bitcoin holding addresses, and accumulation from this high level still shows a promising sign.”
Meanwhile, data from on-chain analytics firm CryptoQuant eased concerns that users were sending large quantities of bitcoin to exchanges for sale. The general trend of declining exchange reserves continues and is currently at October 2018 levels.
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