“Last week of the bear rally” – 5 things to know in Bitcoin this week

Bitcoin (BTC) enters another week with a bang after sealing its highest weekly close since mid-June – can the good times continue?

After a volatile weekend, BTC/USD managed to limit losses in the later part of the weekend to produce a solid green light on weekly timeframes.

In what could be shaping up to be the last “quiet” week of the summer, bulls have time on their hands in the absence of major macro market drivers involving the US Federal Reserve.

The fundamentals of Bitcoin remain strong, which is due to an increase in mining difficulty for the second time in a row in the coming days.

In derivatives markets, there are also encouraging signs, with higher price levels accompanied by bullish data over sentiment.

The question for hodlers now is how robust the rally is and whether it is just that: a bullish countermovement within a broader bear market.

Cointelegraph presents five factors that could affect the price this week and help determine Bitcoin’s next step.

Bitcoin embraces volatility after several weeks of high-close

At around $24,300, the weekly close on August 14 was the best in two months for BTC/USD.

The weekly chart shows a steady upward move that continues to take shape after the June low, and last week’s candle was around $1,100 or 4.8%.

An impressive move by 2022, the gains sparked some overnight volatility into the week’s first Wall Street trading day, BTC/USD continuing to reach $25,200 on exchanges before reversing noticeably below the weekly close.

BTC/USD 1-week candlestick chart (bitstamp). Source: TradingView

Such moves characterized the past few days, bringing little surprise to traders who continue to trade cautiously on shorter time frames.

“A new week begins, with the bears going in so far to retest some key levels,” popular trading account Crypto Tony in summary in part of his last Twitter update of the day:

“Again we should see an interesting week of price action. Been all over the shop on the lower time frames.”

Should unpredictability continue to come, the chances of a downturn are clear, according to material indicators for monitoring resource in the chain.

After the close, the weekly chart started to signal “downward momentum”, it warnedwhile daily timeframes were “flat” according to its proprietary trading tools.

Its creator, materials scientist, described this week as the “last week of the bear rally” in his own comments.

Still entertaining a much deeper correction – perhaps unsurprisingly – was gold bug Peter Schiff, who claimed $10,000 was still on the cards.

However, on a long-term basis, fellow trader and analyst Rekt Capital was calm on the BTC price action.

A spot price below $25,000, he said, should be used for dollar cost averaging (DCA) in Bitcoin – buying a set amount per set period – until the next block grant halving in 2024.

“To succeed in Crypto you need a dollar cost averaging strategy, an investment mission, a vision and patience,” he told Twitter followers this weekend:

“My DCA strategy is anything under $25,000. My thesis is based on the 2024 Halving event. Vision sees Bull peaking a ~year after the Halving. Now I’m just patient.”

Macro remains on a “knife edge”

After last week’s US inflation pressures, the next five trading days look relatively calm from a macro perspective.

The Fed is silent and only allows unexpected events in Europe or Asia to influence market developments.

However, the likelihood of crypto continuing to react to macro triggers beyond inflation may already be lower than many believe, according to a popular analyst.

In a recent market update for his trading suite, DecenTrader Filbfilb saw declining correlation between BTC and what he called “legacy markets” more broadly.

“Bitcoin followed a high correlation with older markets as shown below with the S&P500 in white and the NASDAQ in blue, but since hitting the recent bottom, all the downside in the older markets has been regained and Bitcoin has failed to follow suit,” he wrote at side of a comparative chart.

BTC/USD vs. Nasdaq mini-futures vs. S&P 500 mini futures chart. Source: TradingView

Since June’s low of $17,600, Bitcoin has not actually risen as much as the previous correlation suggests, Filbfilb added, arguing that the spot price should be above $30,000.

The reason lies in The Terra and Celsius debacles make for something of a perfect storm when taken in tandem with concerns over inflation and the Fed’s response to it.

“What hasn’t changed is Bitcoin’s propensity to be at the mercy of the Fed’s inflation-fighting policies. Wednesday’s better-than-expected inflation data is the latest example, which sent Bitcoin leaping north, along with stocks,” the update continued:

“Going forward, the CPI data and the following monetary policy decisions will continue to be crucial in determining what happens next.”

Geopolitical factors including the Russia-Ukraine conflict, tensions over Taiwan and the looming European energy crisis add additional risk factors. The macro market situation, Filbfilb concluded, is therefore still on a “knife’s edge.”

Meanwhile, bucking the trend on the day is news from China, which adopted a swift cut on disappointing economic data.

“July’s economic data is very alarming,” Raymond Yeung, Greater China economist at Australia & New Zealand Banking Group Ltd, told Bloomberg in response:

“Authorities must deliver a full support from property to Covid policy to stop further economic decline.”

Lex Moskovski, CEO of Moskovski Capital, meanwhile, predicted that all central banks would end up lowering, not raising, interest rates:

“They will all turn,” he responded.

Good financing rates despite $25,000

Looking at the impact of current spot price action on trading habits, it appears that conditions may still favor further upside.

Analyzing derivatives markets, Philip Swift, a builder at DecenTrader and founder of the Look Into Bitcoin data resource, highlighted negative funding rates.

Indicating growing conviction among traders that the downside is to blame, moderate negative prices are actually often the basis for further gains. This is because the market expects downside and doesn’t bet too much on gains materializing, allowing short positions to be “squeezed” by smarter money.

Bitcoin, along with crypto markets in general, has a habit of doing the exact opposite of what is expected by the majority.

“Interesting to see funding rate going negative at times on this recent rally for $BTC,” Swift commenteduploads a chart showing price behavior under similar setups previously:

“Notice how the price has pumped after each occasion.”

BTC/USD funding rates annotated chart. Source: Philip Swift/Twitter

Meanwhile, data from analytics resource Coinglass showed the extent of negative funding compared to the weeks following the spot prices in June.

BTC Funding Rate Chart. Source: Coinglass

Difficulties due to a second straight increase

For the basic Bitcoin network, meanwhile, it’s a case of slow recovery rather than a race higher.

The latest data from statistics resource BTC.com shows that miners are gradually returning to historical levels of activity.

The difficulty level, after months of decline, is set to increase for the second time in a row in the upcoming automated switchover this week.

Although modest, the forecast of 0.9% increase shows that competition among miners is still increasing and that higher prices are decisive for what has been a very stressed part of the Bitcoin ecosystem this year.

At the same time, hash rate estimates – an expression of the processing power dedicated to mining – remain flat below 200 exahashes per second (EH/s).

Basic overview of the Bitcoin network (screenshot). Source: BTC.com

4-month highs for the Crypto Fear & Greed Index

A two-month high for Bitcoin spot price action might be nice to watch, but it’s not the only aspect of the market that’s regaining some serious lost ground this week.

Related: Top 5 cryptocurrencies to watch this week: BTC, ADA, UNI, LINK, CHZ

According to the sentiment gauge Crypto Fear & Greed Index, there is less “fear” among crypto market participants than at any time since the beginning of April.

The latest data shows that the index, which creates a normalized score from a basket of sentiment factors, has replicated all the losses caused by the Terra blowout and beyond.

Over the weekend, the score reached 47/100, the best since April 6, and dropped to 45/100 on the day.

While this equates to “fear” being the overarching market force, the number is a far cry from the depth of “extreme fear” that lasted for a record period in 2022. The index’s lowest level this year was in mid-June, which posted a score of just 6 /100.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

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