Bitcoin (BTC) begins a new week with an entirely different feel to last as BTC/USD seals its lowest weekly close since December 2020.
A night of losses through June 13 means the biggest cryptocurrency is now on course to break its ten-month lows from May.
The weakness left few guesses: Shock inflation data from the US last week set off a chain reaction among risk assets and weak liquidity over the weekend appeared to exacerbate the consequences for crypto assets.
The macro pain continues this week. The Federal Reserve is expected to provide information on rate hikes and the broader economy – the first official policy update since inflation figures.
The mood of analysts on Bitcoin and altcoins – although not unanimously bearish – is therefore one of resignation. A period of painful trading and hodling conditions may have to be endured before a return to the upside, which at least matches the historical patterns of Bitcoin halving cycles.
What could be the market triggers in the coming week? Cointelegraph takes a look at five factors to consider as a Bitcoin trader.
Celsius “collapse” looms, sending Bitcoin plummeting
It’s been a while in coming, but Bitcoin has finally broken out of the tight range it’s been trading in since hitting a ten-month low last month.
After rebounding from $23,800, BTC/USD then circled the $30,000 area for weeks, failing to make a decisive move up or down. Now, while that’s not what investors would like, the direction seems clear.
—Rekt Capital (@rektcapital) June 12, 2022
It is not just a range that Bitcoin has exited, as trader and analyst Rekt Capital noted on June 12. By dropping the area near $30,000, BTC/USD is also dropping a macro trading range that has been in place since early 2021.
As such, the most recent weekly close, at around $26,600, was Bitcoin’s lowest since December 2020, according to data from Cointelegraph Markets Pro and TradingView.
“The worst is over. $BTC 25k defended. Think can squeeze a little now, start selling again tomorrow with stocks”, economist, trader and entrepreneur Alex Krueger predicted.
An attached chart showed a buying support band in place at $25,000, helping to fix the 24-hour losses at 12%.
The market at the time of writing was nonetheless in a state of flux as the dust settled on a grim reminder of what happened during May’s peak below $24,000.
While then it was the implosion of the Blockchain protocol tokens Terra (LUNA) and TerraUSD (UST), this weekend it was the turn of the fintech platform Celsius and its token CEL to follow suit .
Down 40% on the day in USD, CEL predictably suffered from Celsius’ decision to halt withdrawals and transfers altogether in order 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 put Celsius in a better position to honor, over time, its withdrawal obligations,” reads a blog post published on June 13.
Reacting, Bitcoin pundits already skeptical of the altcoin space after the Terra debacle wasted no time in blaming the scale of BTC price losses on the events at Celsius.
gox hack was rough, the ICO bubble was frustrating, but celsius hits the hardest because it feels like we learned nothing from 2008
it was literally on the front page of the bitcoin white paper
And yet time sometimes feels like a flat circle
—Juthica (@juthica) June 13, 2022
“Celsius looks like it could crash and take a lot of money with its customers,” Robert Breedlove, host of the What is Money podcast, said. added in part of the Twitter comments.
Fed policy update looms over 40-year high inflation
A black swan event copying Terra is arguably the last thing Bitcoin needs, given the already fragile macro conditions.
Either way, the possibility of further turmoil remains this week as the Fed’s Federal Open Markets Committee (FOMC) prepares for its June policy meeting which begins June 15th.
After the June 10 inflation reading of 8.6%, the rally is expected to accelerate the pace of key rate hikes – something neither stocks nor crypto assets would like.
Capitulation -> Retest -> Repeat Rinse #Bitcoins saw this 31 day pattern several times in 2022
If Jay Powell and the FOMC surprise with a rate hike of more than 50 basis points, it’s definitely another leg down pic.twitter.com/qMUeGp3gjR
— Matt C⚡️ (@mithcoons) June 12, 2022
Krueger, like others, added that the Fed would most likely be the determining factor in determining the remaining decline in risk assets.
“For the bottom to have to wait for the Fed (or stocks) to turn,” he said. wrote:
“Can we scalp the levels but seriously doubt that any level on its own will bring a change in trend. There is a slim chance the Fed will not turn hawkish on Wednesday and if it does straightens sharply Hawkish acceleration more likely.
An Asian selloff worsened the life of equities earlier in the week, affecting risk-sensitive currencies such as the Japanese yen and Australian dollar.
“At some point, financial conditions will tighten enough and/or growth will weaken enough that the Fed can pause its hike,” Goldman Sachs strategists, including Zach Pandl, wrote in a note cited by Bloomberg on Tuesday. June 13:
“But we still seem a long way from that point, suggesting upside risks to bond yields, continued pressure on risky assets and likely overall US dollar strength for now.”
Bloomberg further reported that a 75 basis point rate hike could be on the table as markets price base rates 3% or higher by the end of the year.
The US dollar wastes no time challenging its 20-year highs
Where risky assets are suffering, the US dollar has made the most of its power over the past two years.
This trend is likely to continue as macro conditions pressure virtually every other currency and risky asset in the world to provide no realistic safe haven.
The US Dollar Index (DXY), despite retreating in recent weeks, is now firmly back on track and targeting the highs of 105 seen in May. These reflect the maximum strength of the dollar since 2002 and at the time of writing they are only 0.5 points down.
“$DXY going strong, no wonder assets are crashing,” Thinking Crypto podcast host Tony Edward replied.
Ever since the cross market crash of March 2020, the strength of DXY has been a reliable counter-indicator of BTC price performance. Until a significant trend change occurs, Bitcoin’s outlook may therefore remain skewed to the sell side.
“The strength of the dollar often leads to a contraction in corporate earnings globally. Today’s inflation problem adds even more pressure on profit margins to squeeze,” Otavio Costa, founder of global macro asset management firm Crescat Capital, Told Followers on Twitter about the dollar versus the Fed’s June 12 inflation narrative:
“It’s only a matter of time before the ‘soft landing’ narrative turns into the same old ‘transitional’ nonsense.”
‘Misery Index’ highlights market fear
There will be no surprises when it comes to crypto market sentiment this week, with the macro mood also worsening.
The Crypto Fear & Greed Index, which uses a basket of factors to determine traders’ general conditions, is poised to plunge into single digits.
Having spent much of 2022 in an area traditionally reserved for market lows, Fear & Greed has yet to convince anyone that a bottom might be present.
On June 13, it measured 11/100, just three points higher than its March 2020 macro lows.
Last week’s inflation also wreaked havoc on the traditional market’s Fear & Greed index, which is now back in its “fear” zone at 28/100, according to CNN data.
It’s not just the financial world feeling the pinch, the so-called “Misery Index”, which measures inflation and unemployment, is showing signs that economist Lyn Alden describes as “not terrible”.
“Combined with the current amount of debt/GDP versus the past, it’s no wonder consumer sentiment is at an all-time high,” she said. commented on Fed data.
“The Opportunity of a Lifetime?”
Given the current circumstances, it may seem that there are no more Bitcoin bulls to provide a silver lining to the multiple clouds on the horizon.
Related: Top 5 cryptocurrencies to watch this week: BTC, FTT, XTZ, KCS, HNT
Zooming out, however, many see the current market setup as a golden investment opportunity if exploited properly.
Among them is Filbfilb, co-founder of trading suite DecenTrader, who over the weekend called Bitcoin “the opportunity of a lifetime.”
“Just to be clear, despite the short/medium term issues which are unfortunately across the board, if you can survive and play your moves properly without blowing up or risking too much so you don’t have any capital, that’s IMO opportunity of a lifetime,” he wrote as part of a Twitter thread.
Like others, Filbfilb linked BTC performance to stocks, warning that the average hodler is blind to the “over-leveraged” conditions that still exist on exchanges.
“They’ll feel the pinch,” he continued.
Contextualizing Bitcoin now in its four-year halving cycle, analyst Venturefounder, meanwhile, argued that the peak pain scenario could enter in the coming weeks.
#Bitcoins the end-of-cycle surrender may be happening now.
— venturefoundΞr (@venturefounder) June 13, 2022
Currently midway through its cycle, BTC is in a place that has looked like a bearish capitulation twice before – in 2014 and 2018.
The views and opinions expressed here 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 conduct your own research when making a decision.
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