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A pivotal month for GBTC market effect is about to begin, with BTC price action continuing to “do everything right” to maintain support.
Bitcoin (BTC) begins the new week in familiar terrain – critical support has returned, but bulls have yet to break through. Is this about to change?
After regaining $33,000 on Friday, BTC/USD has remained in the trading range it was in before to last week’s short turbulence.
This included a drop below $32,000 as a result of unexpected short positions building on the exchange Bitfinex.
However, the effect was just brief, as Bitstamp reached highs of $34,600 over the weekend.
Here are five things to think about when predicting what Bitcoin will do next.
Stocks boom as USD hits classic resistance
With equities rising as expected, there appears to be no friction that may stymie bitcoin advances.
While analysts are increasingly warning of a coming downturn, the atmosphere in equities remained solidly upbeat this week.
“There appears to be a complacency that Goldilocks is not only alive and well, but getting stronger by the day,” said Simon Ballard, chief economist at First Abu Dhabi Bank, according to Bloomberg.
“Unfortunately, it has to be recognized that going forward, the longer that rates remain where they are, the more that we look toward tapering, the more severe and acute could be the reaction.”
The United States dollar, however, could provide more clues.
Taking a look at the U.S. dollar currency index (DXY), which measures USD strength against a basket of 20 trading partner currencies, the picture shows some familiar resistance is back in play.
Late last week, one expert suggested that DXY needed to increase from its current level of 92.2 to approximately 94 in order for substantial resistance to emerge, therefore boosting Bitcoin.
On Monday, however, DXY is still rebounding from losses sustained at the conclusion of the week, while also contending with a zone that has previously kept it in check.
Bitcoin’s negative connection to DXY has also lately been scrutinised, as BTC increasingly forges its own course within the macro environment.
Bitcoin price “doing all the right things”
Looking in the current market, traders are optimistic about $33,000 resuming and enduring after a small negative event last week.
Rekt Capital, a trader and analyst, said on Sunday that BTC/USD is back at the lower end of an established range after “reaffirming” the level.
“BTC is breaking back above the orange trendline,” he said in a subsequent update alongside a chart showing the current landscape.
“$BTC is doing all the right things to reclaim this trendline as support. Reclaim the trend line as support and that’ll be great progress towards challenging for a breakout from this blue wedging structure.”
Monday has continued the trend, with Bitcoin trading at around $34,350 at the time of writing.
“Bitcoin is trying to rally and close an 8th week in a row above 34k with a long wick down. Lots of demand still,” fellow trader Scott Melker added.
Last week, targets of up to $39,000 were in for Bitcoin should bulls manage to attack $35,500 resistance and continue, something that in the event failed to occur.
Fundamentals sustain their comeback
If last week’s price action disappointed, under the hood, Bitcoin has been working on a more important turnaround.
Data from monitoring resources on Monday shows that both network difficulty and the hash rate are stabilizing and that, therefore, the worst of the recent mining turbulence could be firmly over.
Following its historic decline earlier in July, difficulty was previously on course to outperform even its most recent performance, dropping another 28 percent or more.
However, in the interim years, there has been some progress towards recovery. If price action remains at present levels, the next difficulty adjustment should only be a 10% decline.
“Blocks coming in at a rapid phase — next difficulty adjustment is now estimated at ~ -7.5% but it seems to me like hash rate is coming back pretty quickly at the moment,” angel investor Klaus Lovgreen summarized on the day.
The modifications demonstrate the Bitcoin network’s ability to balance itself without external aid – regardless of the conditions, difficulty adapts to accommodate for every conceivable outcome.
The estimated hash rate is just slightly higher than its previous lows of 83 exahashes per second (EH/s), but even here, stability and a steady return to the norm can be seen.
According to Cointelegraph, these measures are likely to rise further when mining power returns to Bitcoin after migrating out of China. The timeline for this, on the other hand, is anyone’s estimate.
Grayscale unlocks 40,000 BTC
The repeated unlockings of BTC at institutional behemoth Grayscale are an event on every Bitcoin market participant’s radar this month.
As previously stated, the Grayscale Bitcoin Fund (GBTC) is set to release more than 40,000 BTC in the next weeks, subject to a six-month lock-up period.
Opinions on its market impact differ. Some are afraid that selling pressure will rise (only to fall to near zero once the unlockings are completed), while others contend that spot markets will be largely impacted.
The unlocking on Sunday, July 18, is of special interest, with that day’s unlocking valued little more than 16,000 BTC.
“When GBTC shares unlock and get sold, the GBTC Premium drops (share price drops relative to the BTC in the trust),” statistician Willy Woo commented last week.
“Investors now have more incentive to by GBTC shares rather than BTC, it diverts some of the buying pressure on BTC spot markets. This is bearish.”
Bullish price metric nears “launch zone”
In need of some reliable “hopium” for the week ahead? Bitcoin market analytics has the answer.
On Monday, attention was turning to a nifty indicator from on-chain data service CryptoQuant, which has historically caught every major BTC price run in the past two years.
Dubbed the Taker Buy Sell Volume/Ratio, it tracks exchange data to produce as a guide for when to hodl and when is a good opportunity to take profit during a local market cycle.
Right now, the Ratio appears to be forecasting another BTC/USD surge, leading to a classic “take profit” point.
Analyst Cole Garner has even highlighted what to expect should history repeat itself. He noted, however, that the trigger phase — where the Ratio touches the upper green channel — has “not happened yet.”
“Buy signal incoming,” he nonetheless commented.