Bitcoin continues to trend to the upside over the short term as the crypto market hints at further gains. The bullish momentum seems to be driven by the positive earnings seasons and the U.S. Federal Reserve (Fed) interest rates hike.
The financial institution announced a 75 basis points (bps) increase in interest staying within market expectations. Bloomberg Intelligence’s Senior Commodity Strategist Mike McGlone believes the Fed might have marked the pivot for Bitcoin.
By staying within market expectations, the financial institutions might give room for the bullish trend to expand in the coming months. The Fed has been trying to mitigate inflation in the U.S. dollar, as measured by the Consumer Price Index (CPI).
This metric stands at a 40-year high but seems poised to trend downwards. The Bloomberg Intelligence analyst claims the price decrease across the commodities sector hints at this possibility and could provide the Fed with the support to “lighten the rate hike sledgehammer”.
This would benefit stores of value assets, such as Gold, U.S. treasury bonds, and Bitcoin. The cryptocurrency has been suffering, McGlone argues because it’s deemed a nascent asset with relatively new technology.
This disadvantage might fade into the background as Bitcoin’s adoption curve increases versus its total supply. As seen below, if the cryptocurrency follows the internet’s adoption curve, it could record over 1 billion users by 2025.
In the short term, BTC’s price might benefit from mitigation in the macro-economic factors playing against it. The next major event will be July’s CPI print to be announced in August, which might result in more fuel for the current bullish price action. McGlone wrote:
(Fed’s) “meeting by meeting” comment may mark the pivot for #Bitcoin to resume its tendency to outperform most assets. New and untested are becoming past tense fast for the benchmark crypto, likely in the early recovery days from a severe drawdown.
Can Bitcoin Resume Its “Propensity To Outperform”?
Further data provided by McGlone shows a decrease in BTC’s price 250-day volatility versus the Bloomberg Commodity Spot Index. As seen below, whenever this metric trends downside, the price of Bitcoin reacts moving in the opposite direction.
A decline in BTC’s price 250-day volatility marked the beginning of the 2012 and 2017 rallies. In that sense, McGlone pointed out:
The lowest-ever Bitcoin volatility vs. the Bloomberg Commodity Index (BCOM) may portend a resumption of the crypto’s propensity to outperform (…). If history is a guide, Bitcoin volatility is more likely to recover vs. commodities when the crypto heads towards new highs.
TA: Bitcoin Price Takes Hit, Why BTC Remains at Risk of More Losses
Bitcoin price started a fresh decline from the $24,250 resistance zone against the US Dollar. BTC declined below $23,000 and remains at a risk of more losses.
- Bitcoin started a fresh decline below the $23,500 support zone.
- The price is now trading below the $23,500 level and the 100 hourly simple moving average.
- There was a break below a major bullish trend line with support near $23,320 on the hourly chart of the BTC/USD pair (data feed from Kraken).
- The pair must clear the $23,250 resistance to start a fresh increase in the near term.
Bitcoin Price Breaks Support
Bitcoin price struggled to gain pace above the $24,000 resistance zone. The price formed a top near $24,285 and started a fresh decline.
There was a clear move below the $23,800 and $23,500 support levels. The bears pushed the pair below the 61.8% Fib retracement level of the upward move from the $22,846 swing low to $24,286 high. Besides, there was a break below a major bullish trend line with support near $23,320 on the hourly chart of the BTC/USD pair.
Bitcoin price is now trading below the $23,500 level and the 100 hourly simple moving average. It is now consolidating above the key $22,650 support zone.
Source: BTCUSD on TradingView.com
On the upside, an immediate resistance is near the $23,250 level. The next key resistance is near the $23,500 zone. A close above the $23,500 resistance zone could start a steady increase. In the stated case, the price may perhaps rise clear the $24,000 resistance.
Downside Break in BTC?
If bitcoin fails to clear the $23,500 resistance zone, it could continue to mov down. An immediate support on the downside is near the $22,650 level.
The next major support now sits near the $22,500 level. A close below the $22,500 level might start a move towards $22,000. If the bears remain in action, there is a risk of a move towards the $21,500 level in the coming sessions. Any more losses might send the price towards $20,500 level.
Hourly MACD – The MACD is now gaining pace in the bearish zone.
Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now well below the 50 level.
Major Support Levels – $22,650, followed by $22,500.
Major Resistance Levels – $23,250, $23,500 and $24,000.
Weekly crypto asset flow has these profit-making statistics
Inflows into digital asset investment products totaled $3 million last week, bringing the sixth consecutive week of inflows to a total of $529 million, CoinShares found in a newly published report.
Last week’s inflow represented a 96% decline from the $81 million recorded in inflows the previous week.
Inflows into digital asset investment products totaled $3 million last week, bringing the total inflows since the beginning of the month to $3.1 million.
CoinShares found that last week’s inflows represented 1.7% of the total assets under management (AuM). It further stated that despite the market downturn in the last quarter, 32 new investments have been launched, primarily in altcoins.
Bitcoin and Bitcoin-short in the last week
According to the report, last week, Bitcoin logged outflows. These outflows totaled $8.5 million. The outflows recorded brought the year-to-date (YTD) inflows for the king coin to $311.9 million, a decline from the YTD index of $326.1 million recorded in the previous week.
Still, a king, Bitcoin’s YTD inflows represent 63% of the YTD total inflows of $492 million recorded by all assets considered by CoinShares in the report.
Further, Coinhares found that short-Bitcoin investment products also recorded outflows that totaled $7.5 million. That was the second consecutive week of outflows for short-Bitcoin. In the previous week, it saw outflows of $2.6 million.
These outflows, according to CoinShares, suggest that “investors believe bitcoin prices have troughed.”
What about Ethereum?
For Ethereum, inflows in the last week totaled $16 million, bringing it to its near seven consecutive week run of inflows of $159 million.
“We believe this turn-around in investor sentiment is due to greater clarity on the timing of The Merge where Ethereum shifts from proof-of-work to proof-of-stake,” CoinShares stated.
The report, however, stated that on a YTD basis, the leading alt had seen outflows of $300 million.
Regionally, most inflows were from North America and Europe, with inflows from the United States and Germany totaling $16.8 million and $7.8 million, respectively.
All other regions considered in the report registered inflows except Canada, which saw an outflow of $29.9 million.
Commenting on the reason for the low weekly inflow, CoinShares, thus, stated:
“Despite improving sentiment, trading volumes remain very low at US$1.1bn for the week versus the year-to-date weekly average of US$2.4bn. We believe the low participation is seasonal as a similar trend has been seen in previous years.”
Why Are Crypto Investors Rotating From Bitcoin To Altcoins?
The crypto market is pulling back into support and could face potential headwinds in the short term. In the crypto top 10, Bitcoin has been outperformed by the altcoins sector with Ethereum and Binance Coin, and Polkadot still preserving some of its gains from the past week.
This shows a shift in the crypto market dynamics as investors seem to be regaining confidence in the sector and moving away from Bitcoin. Therefore, the number one crypto by market cap appears to be lagging which translates into a decline in Bitcoin dominance.
As seen below, this metric has been moving sideways since May 2022 after seeing a small push to the upside. In 2021, as Ethereum and other altcoins reached new all-time highs, Bitcoin dominance plummeted to its current levels.
If the current trends continue, Bitcoin lagging the altcoin sector, the metric could re-test its yearly lows and drop from 43% into the high 30% area which could provide altcoins with more room to reclaim previously lost territory.
According to a report from Arcane Research, their Crypto Indexes for altcoins have been showing positive returns in August. As seen below, the research firm records 9%, 7%, and 5% profits for their Large, Mid, and Small Cap Index while Bitcoin records 2% profits.
The latter shows the biggest increase as risk exposure trends upwards, and stablecoins market shares follow a similar trajectory as that of the Bitcoin dominance. Arcane Research noted:
With bitcoin underperforming relative to altcoins, the bitcoin dominance has plummeted from a peak of 47% in the middle of June to 40.5% now. As the market sentiment has improved traders have been more interested in getting exposure to altcoins than bitcoin.
In the crypto market, altcoins might continue to dominate in the short as BTC’s price moves sideways. Thus, investors seeking higher returns might consider rotating into Large to Mid-cap cryptocurrencies, and Small Cap if they have bigger risk tolerance.
Why Is The Crypto Market Seeing Short-Term Downside Price Action
Despite a positive month for the majority of the crypto market, most cryptocurrencies are experiencing downside price action on low timeframes. This is due to the potential short-term impact of the macro-economic factors affecting the sector.
Tomorrow, the U.S. Federal Reserve (Fed) will release July’s Consumer Price Index (CPI) print. This metric is used to measure inflation in the U.S. dollar, which has been trending upwards and stood at a 40-year high.
Thus, the Fed has been hiking interest rates and shifting its monetary policy in an attempt to slow down inflation. If July’s CPI print hints at success in those attempts, the financial institution might be inclined to act less aggressively.
This could lead to a stronger bullish momentum across risk-on assets, such as Bitcoin and the crypto market. In the meantime, market participants seem to be sidelined and expecting tomorrow’s outcome. A pseudonym trader said the following on the above:
CPI relation with Bitcoin. Now that gas prices are lowering, we’ll see a decrease or inflation holding/cooling. This will give confidence back to investors. Fed rate lowers to 50 bps at next FOMC meeting, showing optimism to investors. Don’t get shaken out before the move up.
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