Bitcoin (BTC) starts Monday avoiding another $9,000 test, but what could happen to change the mood or even trigger a bull run?
Cointelegraph looks at five major facts that could influence the BTC price in the coming week
Stocks under pressure: is “valuation” important?
The macroeconomic outlook seemed more or less stable on Monday. Prior to trading, futures contracts on the Dow Jones, S&P 500 and other indices were up slightly, despite growing concerns about coronavirus.
Specifically, a source quoted by Bloomberg warned on Sunday that the sentiment is one of concern – both about the spread of cases and about the US response to protect the economy
If the Federal Reserve intervenes in equities again and increases its balance sheet, it will reinforce the sense of an artificial presence in the markets in terms of competition.
“It’s possible the Fed didn’t go far enough,” wrote Sanford C. Bernstein’s quantitative strategists in a note.
“If that happened, then maybe the market assessment just doesn’t matter.”
Fed balance sheet as of July 7, source: Federal Reserve
As reported by Cointelegraph, Bitcoin has shown no signs of diminishing inventory dependency in recent weeks. Movements up or down appear to have influenced the performance of the BTC/USD, with last week’s trip from $9,000 to close to $9,500 and the return to the downside being no exception.
Analysts are particularly interested in the S&P 500, an index with which Bitcoin currently has a 95% correlation
Coronavirus is also weighing on US consumer confidence, as new data shows, with five indicators all down in July, following a recovery in the previous two months.
A tale of two clues of fear and greed
At the macroeconomic level, the sentiment of cryptocurrent operators is still in contrast with that of traditional markets.
This is the conclusion of two incarnations of the Fear & Greed Index, a basket of factors designed to show whether traders are too risky or too confident.
The Crypto Fear & Greed Index remains in the “fear” category with little movement for several weeks. In contrast, the traditional market equivalent is flashing “greed”, while slowly moving towards “neutrality”
On a scale of 1 to 100, Monday scored 59 points, down seven points from the same period a month ago. The equivalent in cryptocurrent reached 43 for Monday and 38 last month.
Traditional “greed” was fueled by “extreme greed” in the range of stock prices, while derivative calls and puts, as well as demand for safe havens, were also in the “greed” range.
Graph 1 month of the Crypto Fear & Greed index. Source: Alternative.me
Cash and gold inflows exceeded equity inflows in 2020
The account of greed is consistent with other signs that actions, in particular, are overly successful
As market commentator Holger Zschaepitz noted on Monday, the correlation between the Nasdaq and the S&P 500 is rising, in what he described as a “sign of exuberance”
At the same time, banks are preparing to record dismal quarterly results, which are set to become the worst since the financial crisis of 2008.
As Cointelegraph noted, fears about the stock rally since March have long persisted in Bitcoin circles. The Fed’s interventions, in particular, have fueled accusations that the whole atmosphere is now artificial, and that the “true” value is of limited relevance.
This week’s figures show that investors themselves have in fact opted for cash and gold – not equities – in 2020. Since the beginning of the year, capital inflows into these two assets have been higher than in the others, as in 2008-2009.
Chart of inflows as a % of assets under management. Source: Jeroen Blokland/ Twitter
Bitcoin’s fundamentals remain strong
On Monday, a further adjustment to the difficulty of Bitcoins is made, the latest in a series of bullish moves that underline miners’ confidence.
A few hours before the event, estimates suggest a rise in difficulty of about 9.5%
This move is much stronger than the previous one two weeks ago, which was stagnant, and on track to match last month’s 15% increase, which was the largest since the beginning of 2018
The difficulty represents the effort required to solve the equations when extracting new blocks of bitcoin. Upward adjustments suggest more competition, with Monday’s estimate increasing slowly over the past week.
At the same time, the network hash rate, which last week reached a record average level, has decreased slightly. Blockchain data estimates the seven-day average at 124.42 pps for Monday, after having reached 126 pps previously.
The hash rate is a sensitive and inaccurate measure, but it nevertheless gives an idea of the computing power devoted to bitcoin extraction. Large fluctuations are not uncommon, and popular theory suggests that the upward progression of the hash rate is followed some time later by an imitation of bitcoin prices.
Graph of Bitcoin’s 7-day average hash rate over one month. Source: Blockchain
Warnings remain on derivatives
Bitcoin’s futures markets generated few opportunities for price movements over the weekend. The low volatility means that the markets will start Monday in a position similar to the one they ended on Friday.
If Monday and Friday do not correspond, a “void” opens up on the futures markets that the BTC/USD spot tends to fill in the days or even hours that follow.
The chart of the WEC Bitcoin futures contracts shows the absence of a weekend spread. Source: TradingView
Specifically, one indicator showed strange similarities with the days before the Bitcoin crash in March. If history repeats itself, he added, however, the decline should not be as intense as it was at that time.