- As crypto bank Celsius files for bankruptcy, bitcoin is stuck in a sideways move.
- Investors are trying to decide if the bad news is all factored in or if another dip is ahead.
- Kraken analysts pointed to a key chart to understand where the price is going.
Bitcoin needs to make up its mind. It has been hovering around $20,000 since early June, with brief dips below and surges above.
The price action of bitcoin and much of the broader crypto market reflects investor indecision as to whether all the bad news has been factored in or not.
There has certainly been a lot of bad news. An extremely poor macroeconomic environment for all risk assets, with high inflation and an aggressive Fed hike, has been compounded by the crypto-specific collapse of the Terra Luna blockchain, the “crypto bank”. Celsius goes bankrupt and hedge fund Three Arrows Capital which is going bankrupt with huge bad debts.
We’ve seen a 75% drop in bitcoin’s price from its peak, and much of the broader market is down 90% from all-time highs. It looks very much like a bottom in formation, but uncertainty remains.
The price has become highly correlated with the stock market and interest rate expectations, behaving like a high-risk, speculative tech stock, rather than a commodity or currency.
While this is clearly a bad thing when the macro environment is negative for stocks, conversely it could mean that inflation peaking and starting to decline could be very positive for the crypto.
That point could be close, with this week’s consumer inflation of 9.1% in June seen as the likely peak, with next month’s reading expected to be lower.
As always with crypto, wildcards can appear at any time. An example of this is the expectation that the administrators of collapsed crypto exchange Mt Gox will throw an estimated $3 billion worth of bitcoin into the market in the coming weeks as they work through the legal process of repossessing the coin. money to creditors.
Some see this as the trigger for another leg down in price, but given that it is widely known, it could easily fall into the already priced category.
Nick Heale, head of business advisory at digital asset broker GlobalBlock, said it was remarkable that bitcoin remained strong in the $20,000 region despite all the negative news flow.
“US dollar strength as reported by DXY, which measures the strength of the US dollar against six other foreign currencies, is at its highest level in 20 years. The US dollar is currently at par with the euro, indicating the degree of fear in financial markets generally as traders flee to US dollar heaven.”
“It is indeed surprising that bitcoin has remained constrained for such a long time, considering the broader geopolitical and macroeconomic factors. In China, we have heard reports of bank runs due to depositors’ accounts being frozen, a default from Sri Lanka, not to mention the ongoing war in Ukraine and escalating COVID measures in China which will continue to impact the supply chain.”
“Given this, it is understandable that bitcoin remains technically oversold, although the fundamentals of a decentralized asset remain intact,” he added.
Yuya Hasegawa, crypto market analyst at Bitbank, noted that the same macro picture is fueling bitcoin as the stock market. Improvement on this front will be the trigger for bitcoin to rise again.
“Bitcoin started the week down as risk sentiment deteriorated ahead of Wednesday’s US CPI announcement. The market received some hope last week as the Fed’s Waller said that a 50 basis point rate hike at the September FOMC meeting was a possibility.However, now the market is paying increasing attention to US inflation data and the report on employment last week did little to improve the situation.”
Hasegawa added that bitcoin’s upside is likely to be limited until better inflation numbers emerge and its 200-week moving average, which currently sits at around $22.6,000, appears to offer “strong resistance.” “on rising prices.
According to analysts at Kraken Intelligence, however, bitcoin has already hit an extremely low level in terms of the 200-week moving average multiple chart, suggesting that a bottom may be in, or at least approaching. It is certainly a painting to which we must pay particular attention.
Being at a multiple of 1x has in the past been a launchpad for big upside moves, as the chart here shows.
If the bullish sentiment returns and bitcoin hits 10 to 15 times the 200-week moving average again, that would imply a new price spike between $214,987 and $322,481, Kraken said.