Bitcoin (BTC) faces another week of “huge” macro announcements after its lowest weekly close since July.
After days of losses following the latest inflation data out of the United States, BTC/USD, like altcoins and broader risk assets, has not recovered.
The largest cryptocurrency has yet to flip $20,000 to convincing support and as we enter the third full week of September there is a renewed risk that this level could act as resistance.
Bulls have a lot to fear – in the coming days the Federal Reserve will decide on the next interest rate hike, something that will affect the market well beyond just sentiment.
Additionally, the aftermath of the Ethereum (ETH) merger continues to play out, while defunct exchange Mt. Gox’s refunds to creditors add another potential cloud to the bitcoin price landscape.
Cointelegraph takes a look at five potential market-moving factors to watch for Bitcoin over the coming week.
Fed rate hike ‘sledgehammer’ in focus
The main event of the week is the US Federal Reserve’s interest rate decision.
After the August Consumer Price Index (CPI) print came out ‘hotter’ than expected, the Fed will be under pressure.
Therefore, according to the CME FedWatch tool of Sept. 19, the market has now fully priced in at least a 75 basis point hike in Fed interest rates and is not discounting the 100 basis point opportunity.
A 100-point hike would be the Fed’s first such move since the early 1980s.
Chart of Fed target rate probabilities as of September 19, 2022. Source: CME Group
The Federal Open Market Committee (FOMC) is scheduled to meet on September 20-21 and release a statement confirming the Fed’s increase and support for the number in question.
“The Fed isn’t going to be easing anytime soon and that’s classic human nature because now we have the benefit of knowing the extent of the mistakes they made in easing too much,” he said Mike McGlone, senior commodity strategist at Bloomberg Intelligence, in an interview with Kitco over the weekend.
Risk asset growth since the March 2020 crash has “swept way too far to one side,” he said, and it is now “very clear” that a reversal is about to occur.
Crypto will play a role in rebalancing the overall market, and Bitcoin will ultimately come out on top, McGlone continued, echoing a long-held theory about the future of cryptocurrency. Gold will also outperform, but for both the pain comes first.
“Unfortunately, for the Fed to stop this sledgehammer, risk assets have to get them to stop by tightening for them,” he summarized.
A move of 100 basis points this week would accelerate this process, which is now seeing catalysts from central banks outside the US after they have been slow to start raising rates to fight inflation.
Popular Twitter analytics account Games of Trades, meanwhile, said it was crisis time for the S&P 500 before Wall Street began trading.
#SP500 has reached its “Line in the Sand” level.
This is the point of sinking or swimming. fly or fall. Fish or Cut Bait. pic.twitter.com/ZaCfAfcHcE
— Trading Game (@GameofTrades_) September 18, 2022
“In times like these, with a lot of uncertainty across the board, without stocks’ permission, the crypto market isn’t going to do much,” added analyst and commentator Kevin Svenson.
Spot rate falls after poor weekly close
Tailwinds for Bitcoin have been piling up over the past week, causing BTC price action to decline in like manner.
BTC/USD shed over $2,000 in a single weekly candle to close below $20,000, its lowest close since July, data from Cointelegraph Markets Pro and TradingView shows.
BTC/USD 1-week candlestick chart (Bitstamp). Source: TradingView
The close was followed by a sharp decline that saw the pair fall below $19,000.
BTC/USD 1 Hour Candlestick Chart (Bitstamp). Source: TradingView
The bearish sentiment is perhaps understandable – the Ethereum merge became a sell-the-news event and, along with macroeconomic triggers, contributed to a fresh flight of risky assets.
Now analysts are considering the likelihood that the downtrend will last at least until the Fed’s rate announcement is passed.
“BTC has weathered the weekend, but there’s always potential for some pre-close volatility,” on-chain analytics resource Material Indicators told Twitter followers in part of a Sept. 18 post.
“Huge economic and Fed announcements next week will heat things up again.”
An accompanying chart showed the current state of Binance’s order book, with support around $19,800 as price action failed to sustain.
The day before, Material Indicators had argued that there was also little point in imagining that a deeper decline would be avoided. Judging by the order book, the bidding action has still not been strong enough to support the current level.
If #Bitcoin were really near THE BOTTOM, do you think there would be a liquidity gap between $18K and $18.5K, and wouldn’t you also expect there to be solid bids at least down to the June low of 17.5K $ will give? #Firediagrams
I have no more questions. pic.twitter.com/Xstusqg2T8
— Material Indicators (@MI_Algos) September 16, 2022
Considering when a macro bottom might occur, popular trader Cheds is betting on the fourth quarter this year, describing Bitcoin as “right on track” to do so.
“$BTC starts making range lows weekly,” he added in another tweet to close the week.
At the time of writing, shorts were piling up on both Binance and FTX, suggesting a concerted effort to drive the market lower through derivatives traders. This, Ninja argued, would not ultimately succeed beyond the Wall Street Open.
The US dollar is snaking below multi-decade highs
The US dollar, meanwhile, has recovered from losses recorded following the CPI release and is keeping a close eye on a potential macro top.
A classic headwind for crypto, the US Dollar Index (DXY) is currently just below 110 after consolidating for several days.
The index hit 110.78 earlier this month, its highest level since 2002, while avoiding sustained significant retracements.
Analyzing the immediate future, Hyland last week warned that a “new blow-off top” for DXY would accompany a “capitulation event” in risky assets.
We are heading towards a surrender event
-Gold
-BTC
-Stocks
We are also heading for a US Dollar blow-off top
When? Dunno, but there’s nothing to say the DXY topped
In fact, it’s currently in position for the highest weekly close of the year: pic.twitter.com/UHrJfYsSQP
— Matthew Hyland (@MatthewHyland_) September 15, 2022
Meanwhile, a look at the inverse correlation between DXY and BTC/USD confirms the impact of strong bullish movements of the former on the latter.
US Dollar Index (DXY) vs. BTC/USD 1-day chart. Source: TradingView
Ethereum is getting the post-merge blues
In the week after the much-hyped merger, Ethereum is seeing a major pullback from the hype.
In a move that could skew the market cap share back in favor of bitcoin, ETH/USD is down 25% last week.
The pair is currently trading below $1,300, its lowest level since July 16, and is seeing bearish forecasts from analysts and traders across the board.
ETH/USD 1 hour candlestick chart (Binance). Source: TradingView
“Ethereum fails to hold critical support,” Svenson warned as the weekly close failed to put an end to losses.
Analyst Matthew Hyland, meanwhile, gave ETH/USD a target of $1,000, adding that $1,250 “should be considered some support.”
$ETH There is also a grabbing of the $1355 low as I mentioned would be a good level to take out.
Will the cops be able to drive it back?
A 4-hour close above $1355 would be decent for the bulls. If not, I would target $1285 next. https://t.co/LZACSzzJok pic.twitter.com/Za2Ln5ydgj
— Daan Crypto Trades (@DaanCrypto) September 18, 2022
Against BTC, Ethereum is down as much as 19% over the week, with Bitcoin’s share of the total crypto market cap up 1.2% since Sept. 14.
For the well-known trader CryptoGodJohn, however, everything spoke for a “generation entry” into the pair.
Less enthusiastic was Samson Mow, CEO of bitcoin adoption startup JAN3, who noted that while ETH/USD is still above its 200-week moving average (WMA) at current levels, bitcoin is below its own equivalent.
#Bitcoin is trading 16% below its 200 WMA. #Ethereum is trading 7% above its 200 WMA.
ETH is down 6% for the day, while BTC is down just 2%. ETH is still trading at a premium based on merge expectations and can go much, much lower. ETH 16% below 200 WMA would be ~$1,000. pic.twitter.com/jh7j13ivMd
— Samson Mow (@Excellion) September 18, 2022
The 200 WMA acts as a key trendline during crypto bear markets, and its recapture after losing as support historically signals a return to strength.
The dormant bitcoin supply continues to age
Even as recent price volatility sees an uptick in on-chain activity, hodlers maintain their resolve, on-chain data confirms.
Related: Here’s why a 0.75% Fed rate hike could be bullish for Bitcoin and altcoins
According to analytics firm Glassnode, coins held for at least five years show only one trend – up.
In fresh data of the day, Glassnode confirmed that the percentage of BTC supply last active in September 2017 or earlier hit a new all-time high of 24.8%.
Bitcoin % Supply Last Active 5+ Years Chart. Source: Glassnode/Twitter
The amount of supply, which was last active five to seven years ago, meanwhile, hit the highest level in almost two years – 1.01 million BTC.
Bitcoin supply last active 5-7 years ago. Source: Glassnode/Twitter
At the same time, “younger” coins are also on the move, with the 6-12 month range making its own five-month highs.
Nonetheless, the long-term trend among savvy investors in Bitcoin is clear, as evidenced by the proportion of supply held by long-term holders (LTHs).
“LTH Supply is the 155-day dormant volume of Bitcoin that is statistically the least spent during market volatility,” Glassnode explained last week as the metric hit an all-time high of 13.62 million BTC.
As Cointelegraph reported, bitcoin flows to exchanges posted their largest one-day tally in several months following the CPI event.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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