Bitcoin Federal Reserve

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Will the Fed prevent the BTC price from reaching $28K? — 5 things to know in Bitcoin this week

Bitcoin Federal Reserve
Image Credit: CRYPKYP
1658754664 25 Jul / 13:11

Bitcoin prepares for what promises to be a tense week of rate hikes, earnings, and more as BTC fails to reclaim a crucial trendline.

Bitcoin (BTC) enters a new week with a question mark over the market's fate ahead of another critical United States monetary policy decision.

After sealing a successful weekly close — its highest since mid-June — BTC/USD is much more cautious as the Federal Reserve prepares to hike benchmark interest rates to fight inflation.

While many hoped that the pair could exit its current trading range and continue higher, the weight of the Fed is visible as the week gets underway, adding pressure to an already fragile risk asset scene.

That fragility also shows in Bitcoin’s network fundamentals as miner strain becomes real and the actual cost of mining through the bear market shows.

At the same time, there are encouraging signs from some on-chain metrics, with long-term investors still refusing to give in.

Cointelegraph looks at the week’s possible market movers for crypto, equities, and more in a tense week.

The story of the week, all things being equal, is no doubt the Federal Reserve rate hike.

A familiar tale, the Federal Open Markets Committee (FOMC) on July 26-27 will see policymakers decide on the extent of the next interest rate move. This is tipped to be either 75 or 100 basis points.

As in many jurisdictions, U.S. inflation is at forty-year highs, and its advance appears to have caught the establishment by surprise as calls for a peak are met with even more significant gains.

“Should be another fun one,” Blockware lead insights analyst William Clemente summarized on July 25.

The interest rate decision is due July 27 at 2:00 pm EST, a diary date that could well be accompanied by increased volatility across risk assets.

This potential can be exacerbated; one analyst warned, thanks to low summer liquidity and a lack of conviction among buyers.

“Entering ECB/FOMC/Tech Earnings amid the lowest liquidity of the year. The market is back to overbought. Bulls, let it ride,” Twitter account Mac10 wrote.

A previous post also flagged Q2 earnings reports as potentially contributing to a downwards move in line with previous behavior.

“BTC and risk assets have pumped higher on FOMC events this year, only to sell off after. Is this time different?” fellow analysis account Tedtalksmacro continued:

“June’s FOMC meeting saw the U.S. federal reserve deliver a 75bps hike – the single largest since 1994. More hefty hikes are expected before inflation is ‘normalized.'”

The week is already feeling different from last, even before events begin unfolding — Asian markets are flat compared to the previous week’s bullish tone, which accompanied a resurgence across Bitcoin and altcoins.

While one argument says that the Fed cannot raise rates much more without tanking the economy, Tedtalksmacro pointed to the employment market as a target to keep hikes coming.

“Bitcoin will struggle to move past 28k until data deteriorates,” he added.

Bitcoin’s latest weekly close was a halfway house for bulls, data from Cointelegraph Markets Pro and TradingView shows.

While managing its best performance in over a month, BTC/USD missed out on reclaiming the essential 200-week moving average (M.A.) at $22,800.

After the close, which came in at around $22,500, Bitcoin began falling to the bottom of its latest trading range, still lingering below $22,000 at the time of writing.

“Observing IF we find support at $21,666 horizontal. Patience,” famous trader Anbessa told Twitter followers in his latest update.

Fellow account Crypto Chase, meanwhile, suggested that a return to the 200-week M.A. would result in a further modest upside.

“Chopping around the Daily S/R (red box) with an inability to flip 22.8K (Daily resistance) to support. Multiple attempts to do so, but failing so far,” he wrote alongside explanatory charts:

“If price pushes above again and finds acceptance, I’ll watch 22.8K to become support for potential long entry to 23.2K.”

A later update eyed $21,200 as a potential bearish target, forming a support/resistance level on the daily chart.

At $21,900, however, Bitcoin remained around $1,200 higher than the same point a week ago.

Elsewhere, the latest price action was not enough to change long-term views. For Venturefounder, a contributor at on-chain analytics firm CryptoQuant, a macro bottom had yet to appear, potentially coming in as low as $14,000.

“In line with the past halving cycles, this is still my most viable forecast for Bitcoin before the next halving: BTC will capitulate in the next six months & hit cycle bottom (anywhere between $14-21k), then chop around in $28-40k in most of 2023 and be at ~$40k again by next halving,” a retweeted forecast originally from June reiterated.

In a sign that miners’ troubles due to price weakness may only be beginning, upheaval is now visible across the Bitcoin network.

The difficulty, the measure of competition among miners, which adjusts itself relative to participation, has been declining since late June and is now back at levels not seen since March.

The most recent adjustment was particularly noticeable, knocking 5% off the difficulty total and heralding a change in miner activity. That was the most significant single drop since May 2021, and the next, due in ten days, is currently estimated to take difficulty down another 2%.

As arguably the most critical aspect of the Bitcoin network itself, difficulty adjustments also set the scene for recovery by leveling the playing field for miners. The lower the difficulty, the “easier” — or less energy-intensive — it is to mine BTC due to less competition overall.

In the meantime, however, the need to stay afloat remains a preoccupation, data shows. According to CryptoQuant, miners sent 909 BTC to exchanges on July 24 alone, the most in a day since June 22 and a 5% difficulty decrease.

A turnaround for miners thus remains out of sight this week.

As Cointelegraph additionally reported, it is not just the BTC price that gives miners a hard time under current conditions.

One of the hottest on-chain metrics in Bitcoin has just crossed what is arguably its most fundamental level — zero.

On July 25, Bitcoin’s MVRV-Z Score returned to negative territory after a short week, falling into the zone typically reserved for macro price bottoms.

MVRV-Z shows how overbought or oversold BTC is relative to “fair value” and is popular thanks to its uncanny ability to define price floors.

Its return could signal a new period of price pressure, as accuracy in catching bottoms has a two-week margin of error.

At the beginning of July, Cointelegraph reported on MVRV-Z, giving a worst-case scenario of $15,600 for BTC/USD.

For the crypto market, the past week may well have been a brief period of irrational exuberance if sentiment data is to be believed.

The latest numbers from the Crypto Fear & Greed Index show a steady decline from the most favorable market sentiment since April.

As of July 25, the Index stands at 30/100 — still described as “fear” driving the mood overall but five points above the “extreme fear” bracket in which the market previously spent a record 73 days.

Sentiment has made quite the comeback since mid-June when Fear & Greed hit some of its lowest levels on record at just 6/100.

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