Bitcoin (BTC) starts a new week with a completely different feel to endure as BTC/USD seals its lowest weekly close since December 2020.
A night of losses into June 13 means the largest cryptocurrency is now closer to beating its 10-month lows set in May.
The weakness leaves few puzzled: shock inflation data out of the United States set off a chain reaction in risk assets last week, and weak weekend liquidity seemed to exacerbate the fallout for crypto assets.
The macro pain continues this week. The Federal Reserve will provide information on rate hikes and the broader economy – the first official policy update since the inflation numbers.
Sentiment among analysts for both bitcoin and altcoins – while not unanimously pessimistic – is therefore resigned. It may have to endure a period of painful trading and hodling conditions before bouncing back higher, at least consistent with historical patterns of Bitcoin’s 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, dropping Bitcoin
It’s been a long time coming, but Bitcoin has finally broken out of the tight range it’s been trading in since it first fell to a 10-month low last month.
After bouncing off $23,800, BTC/USD has been circling the $30,000 zone for weeks without delivering any decisive move either up or down. Now the direction seems clear, although that’s not what investors want.
— Rekt Capital (@rektcapital) June 12, 2022
It’s not just a range that bitcoin has exited, trader and analyst Rekt Capital noted on June 12. Exiting the zone near $30,000, BTC/USD is also exiting a macro trading range that has existed since early 2021.
As such, the recent weekly close of around $26,600 was Bitcoin’s lowest since December 2020, data from Cointelegraph Markets Pro and TradingView shows.
“The worst is over. $BTC 25,000 defended. Think a little now, sell stocks again tomorrow,” said economist, trader and entrepreneur Alex Krueger predicted.
An accompanying chart showed a band of buy support at $25,000, which helped hold the 24-hour losses at 12%.
The market was still moving at the time of writing, however, as the dust settled on a grim reminder of what happened during May’s rally below $24,000.
While blockchain protocol Terra (LUNA) and TerraUSD (UST) tokens were imploding back then, this weekend it was the turn of fintech platform Celsius and its CEL token to follow suit.
CEL fell 40% in USD on the day, suffering as expected from a decision by Celsius to halt withdrawals and transfers entirely to “stabilize liquidity”.
“Due to extreme market conditions, we are announcing today that Celsius is pausing all withdrawals, swaps and inter-account transfers. We are taking this action today to better enable Celsius to meet its phase-out obligations over time,” reads a blog post published on June 13.
In response, bitcoin pundits, already skeptical about the altcoin space after the Terra debacle, wasted no time blaming the scale of BTC price falls on events at Celsius.
Gox hack was tough, ICO bubble was frustrating but Celsius hits the hardest because it’s like we didn’t learn anything from 2008
it was literally on the first 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 collapse and take a bunch of customer money with it,” says Robert Breedlove, host of the What is Money podcast added in parts of Twitter comments.
Fed policy update threatens record 40-year inflation
A black swan event copying Terra is arguably the last thing Bitcoin needs given the already shaky macro conditions.
Regardless, there is scope for fresh turmoil this week as the Fed’s Federal Open Markets Committee (FOMC) prepares for its June policy meeting, which begins on June 15.
Following the June 10 inflation read of 8.6%, the gathering is expected to accelerate the pace of policy rate hikes – something neither stocks nor cryptoassets would welcome.
Surrender -> Retest -> Flush Repeat #Bitcoin has seen this 31-day pattern repeated in 2022
If Jay Powell & FOMC surprise with a rate hike of more than 50 basis points, it will definitely be a new leg down pic.twitter.com/qMUeGp3gjR
— Matt C⚡️ (@mithcoons) June 12, 2022
Krueger, along with others, added that the Fed would most likely be the key factor in determining the remaining downside for risky assets.
“Because the downside has to wait for the Fed (or stocks) to turn around,” he said wrote:
“Can scalp levels but seriously doubt each level will reverse trend on its own. Slight chance the Fed won’t go hawkish on Wednesday and if so, bounce sharply. Hawkish acceleration more likely.”
A sell-off in Asia made life difficult for equities earlier in the week, impacting risk-sensitive currencies like the Japanese yen and Australian dollar.
“Eventually, financial conditions will tighten and/or growth will slow enough for the Fed to stop raising rates,” Goldman Sachs strategists, including Zach Pandl, wrote in a June 13 Bloomberg statement quoted message:
“But we still appear a long way from that point, suggesting upside risks to bond yields, continued pressure on risky assets and likely broad-based US dollar strength for now.”
Bloomberg also reported that a rate hike of 75 basis points could be on the table as markets price in interest rates of 3% or more by the end of the year.
The US dollar is wasting no time in challenging the 20-year highs
Where risky assets are suffering, the US dollar has shown its full strength over the past two years.
This trend is likely to continue as macro conditions put pressure on virtually all other world currencies and risk assets to fail to offer a realistic safe haven.
The US Dollar Index (DXY) is firmly back in the saddle despite the recent week’s rally and is targeting May’s 105 highs. These reflect the highest USD strength since 2002 and are only 0.5 points away at the time of writing.
“$DXY is going strong, no wonder assets are falling,” Tony Edward, host of the Thinking Crypto Podcast, answered.
Since the cross-market crash in March 2020, DXY strength has been a reliable counter-indicator for BTC price action. Therefore, until a significant trend reversal occurs, the outlook for Bitcoin could remain skewed towards the sell side.
“The strength of the dollar often hurts corporate profits around the world. Today’s inflation problem is putting even more pressure on profit margins,” said Otavio Costa, founder of global macro asset management firm Crescat Capital. said Twitter followers on the dollar versus the Fed’s inflation narrative on June 12th:
“Only a matter of time before the ‘soft landing’ narrative turns into the same old ‘temporary’ nonsense.”
“Misery Index” underscores market fears
There will be no surprises in cryptocurrency market sentiment this week as macro sentiment is also deteriorating.
The Crypto Fear & Greed Index, which uses a basket of factors to determine overall conditions among traders, is teetering on the brink of a dip into single digits.
Having spent much of 2022 in an area traditionally reserved for market bottoms, Fear & Greed has yet to be convinced that a bottom could be.
On June 13, it was 11/100, just three points higher than its March 2020 macro lows.
Inflationary pressures over the past week have similarly taken their toll on the traditional market’s Fear & Greed Index, which is now back in its “fear” zone at 28/100, according to data from CNN.
Not only the financial world suffers, the so-called “Misery Index”, which measures inflation and unemployment, gives indications that the economist Lyn Alden describes as “not great”.
“Combined with the level of debt/GDP now versus historically, it’s no wonder consumer sentiment is at record lows,” she said commented on Fed data.
“Chance of a lifetime?”
Given the current circumstances, it may feel like there are no more bitcoin bulls to offer a silver lining to the numerous clouds on the horizon.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, FTT, XTZ, KCS, HNT
Apart from that, there are many who see the current market situation as a golden investment opportunity if used properly.
Among them is Filbfilb, co-founder of trading suite DecenTrader, who over the weekend called Bitcoin the “chance of a lifetime.”
“Just to be clear, despite short/medium term issues that unfortunately happen across the board if you can survive and play your moves right without exploding or risking too much leaving you without capital, this is my opinion for the opportunity of your life. ” 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.
“You will feel the pinch,” he continued.
Meanwhile, analyst Venturefounder, who is now contextualizing Bitcoin within its four-year halving cycle, argued that the maximum pain scenario could materialize in the coming weeks.
#Bitcoin End-of-cycle surrender may now occur.
— VenturefoundΞr (@venturefounder) June 13, 2022
BTC is currently in the middle of its cycle in a place that has felt like a bearish capitulation twice before — in both 2014 and 2018.
The views and opinions expressed herein 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 do your own research when making a decision.