5 factors to watch this week

One wonders if Bitcoin (BTC) will start the new week with a drop or with a “bulk purchase”, which is said to be made by a large firm.

The largest cryptocurrency, after its low price performance over the past week, is still stuck in the range below $ 30,000.

While the market is worried about inflation and the summer months are generally a good environment for the bulls, it is a matter of curiosity in which direction the price will move in the coming days. Because, surprise processes are expected in Bitcoin at any time, where every situation can be experienced.

Cointelegraph Markets data highlights five factors to consider in determining which direction the BTC/USD pair will head.

Inflation scares macro markets

A quiet day started for stock and commodity markets due to public holidays in the United States, United Kingdom and other western countries.

However, Asian markets are more stable as traders generally prepare for the start of the slower summer period.

However, today’s inflation news in the mainstream media has the potential to change the process.

There has been a long-standing concern in international markets as central banks decided to increase liquidity due to the Corona virus.

“Policymakers have acknowledged high inflation and high volatility in inflation. You will see inflation rise structurally while this is happening,” Mixo Das, JPMorgan Asia securities strategist, told Bloomberg.

“I don’t think that’s reflected in the prices yet.”

US central bank balance sheet chart. Source: PlanB/Twitter

Inflation, by its nature, is the opposite of what the Bitcoin standard offers, given the fixed supply and non-manipulating nature of cryptocurrencies.

Therefore, moves such as institutional demand and the release of large amounts of cash are expected to continue to grow in line with inflation, which is increasingly tolerated by central banks.

In a discussion about Bitcoin’s energy use earlier this month, Saifedean Ammous, author of “The Bitcoin Standard,” said that about 10 percent of total global value assets are destroyed each year due to inflation. suggested.

Short-termers continue to sell

Monday started off with a somewhat bleak picture for Bitcoin investors. Because there was no increase in the weekend.

At the time of this writing, the BTC/USD pair was hovering around $37,000 and had gradually declined from the local top of $41,000 last week.

This peak has been experienced after a retest of the $30,000 support since the capitulation move in early May.

Analysts disagree about gold investments. This process, which is considered as an opportunity for some and a nightmare for others, coincides with the purchased state of the market.

According to on-chain data source Glassnode, at current price levels, old investors are increasing their BTC savings, while those who have recently bought BTC continue to sell.

This sign points to the “weak hand to strong hand” asset cycle used in the market description. Although this is a common situation, there has been an increase in speed recently.

On the other hand, miners started buying again after entering a short selling period during the initial price drop, which resulted in a decline to $30,000.

Bitcoin savings and BTC/USD pair comparison chart. Source: Glassnode/Twitter

Popular Twitter user Lark Davis described the excitement he had observed among market participants for a long time, “This chart is CRAZY!” with the expression conveyed.

“Miners and long-term investors keep accumulating. Only short-term investors are selling. It’s the same bath!”

The relative strength index (RSI), a critical indicator used to identify overbought and oversold zones, is bottoming out. The last time it fell this much was in the March 2020 crash and the December 2018 slump.

Bulls in trouble with key price averages

For traders, there are some critical levels that Bitcoin must maintain in order to continue the bull market.

In the market update shared by DecenTrader, he emphasized that the 200-day moving average (DMA) and 20-week moving average (WMA) levels need attention.

200-DMA is currently just over $40,000. This level is the region where BTC/USD was rejected last week. 20-WMA is around $49,000.

DecenTrader summarized, “If Bitcoin finds enough demand at the 30,000 levels, the 20-WMA can act as resistance.”

“A lower dip would likely target the low $ 20,000 or 78.6% Fibonacci retracement level. Therefore, the price action over the next week is particularly important.”

The idea that Bitcoin could drop to its 2017 high of $20,000 is not convincing to many, including PlanB, the developer of stock-to-flow (S2F) price models.

Although he admits that the model he has developed has been “tested” by price fluctuations, he does not favor the idea of ​​dropping down to $20,000.

“Of course I disagree. S2F and on-chain data point to a much higher price of $100 to $288k. Time will tell.” said.

He added that the “realized value” of Bitcoin, which is a method of calculating the BTC/USD parity based on the last price of each BTC, is around $23,000. The realized price also increased during the 2013 and 2017 bull markets. This has not yet been observed this year.

“In my opinion, we still have a long way to go to $23,000,” he shared a chart showing the realized price against the 200-WMA. commented.

The relationship between Bitcoin realized price, BTC/USD parity and block reward halving processes. Source: PlanB/Twitter

Financing rates ease worries

Stock market funding rates can be monitored to understand short-term price action.

There is currently a healthy amount of negative data available. It is understood that what is experienced under the current conditions is a short position movement.

DecenTrader explained, “The amount of open interest did not recover as leveraged traders sold on a large scale and did not reopen. Financing also remained low, that is, negative. This resonates with the market.”

As Cointelegraph reported, sales on leveraged positions of $30,000 have shaken the market structure, as traders are risk-averse.

This should allow for organic price growth fueled by real demand from investors who are more likely to hold BTC long-term rather than short-term speculative trading.

Bitcoin funding rates chart. Source: Bybt

Worst May ever?

Is this the worst May ever? From the Bitcoin investor side, it certainly looks that way in terms of monthly returns.

On the last day of May 2021, the market sentiment is not positive as the monthly losses of long-term investors reached almost 40 percent.

By comparison, May is generally a profitable month for BTC/USD. For example, in May 2017 and 2019, more than 50 percent gains were made.

Although the year 2018, which lost 19 percent, went beyond this generalization, it can be said that it was less than this year. May 2021 is currently on track for the worst month since 2013 in terms of both first- and second-quarter performance.

Bitcoin monthly return percentage. Source: Bybt.com

Still, there is no situation to write a doomsday scenario. Bitcoin aside, a recovery is observed in the altcoin markets, and especially in XRP, which has increased by 13 percent during the day.

As traders noted, volumes are promising, especially for the largest altcoin, Ether (ETH).

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