Bitcoin (BTC) is starting a new week still in holiday mode with US financial markets closed for Independence Day.
The biggest cryptocurrency, stuck below the increasingly daunting $20,000 mark, continues to feel pressure from the macro environment as talk of lower levels remains ubiquitous.
After a quiet weekend, hodlers find themselves stuck in a tight range as the prospect of a breakout to the upside seems increasingly hard to believe.
As a trader and analyst points to the 4th of July as the site of a “mad dash to the bottom” for crypto markets, the countdown is on for Bitcoin to weather the fallout from the latest rate hike. the Federal Reserve.
What else might the coming week have in store? Cointelegraph takes a look at the potential market drivers for the days ahead.
BTC price bides its time over a long weekend
Bitcoin emerged from the weekend unscathed, but the classic pitfalls of off-peak trading remain.
The US won’t return to the trading desks until July 5th, offering plenty of opportunities for classic weekend price action in the meantime.
So far, the market has been resilient when it comes to volatility – except for a brief spike at $18,800, BTC/USD circled the area between $19,000 and $19,500 for several days.
Even the weekly close provided no real trend change, as data from Cointelegraph Markets Pro and TradingView showed, with the psychologically significant $20,000 unchallenged.
“Although below the low range, we can expect a drop to $18,000,” popular Crypto trading account Tony reiterated to Twitter followers in a new update on July 4:
“It’s been a very dull few days in the markets, and that’s typical for a mid-range.”
In terms of downside targets, others continued to watch the area around $16,000.
In 2018, The Orange MA was the Bottom. In 2020, The Green MA was bottom. Currently holder of the Green MA (16-17K). If it breaks, there is a possibility of Next Bottom Blue MA (12-13K) $BTC pic.twitter.com/rZILTAOlXf
— Trader_J (@Trader_Jibon) July 3, 2022
With no significant bitcoin futures gap and steady performance in Asian markets, there was little to do in terms of near-term price targets for short-term traders.
The US Dollar, meanwhile, continued to hold near 20-year highs after recovering from its latest provocative retracement.
The US Dollar Index (DXY) was trading above 105 at the time of writing.
Gold set to ‘explode’ against US stocks
With Wall Street closed for Independence Day, US stocks may take a break on July 4.
For a popular chartist, however, the focus is on the strength of stocks versus gold (XAU) in the current environment.
In a Twitter thread, gold monitor Patrick Karim specifically flagged that the precious metal was about to hit an all-time “blowout” zone against the S&P 500 (SPX).
After hitting a low at the end of 2021, the S&P gold ratio has been recovering throughout this year and is now on the verge of breaking through a limit, which has historically led to a significant rise by the following.
“Gold is approaching the ‘take-off zone’ against US equities. Previous take-offs have triggered significant gains for Silver & Miners,” Karim commented.
The situation cannot be said to be the same in USD terms, with USD strength keeping XAU/USD firmly in its place below $2,000 since March.
Nonetheless, for silver fans, the implications are that even a modest push in the XAU/SPX ratio will bring significant returns.
Think about it for a moment.
—Patrick Karim (@badcharts1) July 3, 2022
The predictions again call into question the extent of Bitcoin’s ability to break macro trends. A breakout against BTC for gold would be the natural ripple effect should Karim’s scenario play out, thanks to the continued correlation with stocks.
“After escaping the sideways trend that had been forming for a period of 1.5 years, the correlation coefficient rose sharply to 86% against the S&P 500,” said popular trader and analyst CRYPTOBIRB abstract during the weekend:
“Now at a ratio of 0.78 it remains strongly positive.”
Fellow analyst Venturefounder noted that Bitcoin also remains tied to Nasdaq moves.
Note that previous lows (December 2018 and March 2020) occurred as #BTC and $QQQ correlation at the top, suggesting that the macro has always influenced BTC funds. We can more likely predict that the macro will call the bottom again for BTC this time. pic.twitter.com/szmS4c6WV8
— venturef◎undΞr (@venturefounder) June 26, 2022
Against the dollar, Cointelegraph, meanwhile, reported that Bitcoin’s inverse correlation is now at 17-month highs.
This is the critical moment for Hayes’ ‘mad race to the bottom’
The 4th of July, in addition to being Independence Day, is viewed by one market participant in particular as a holiday like no other – at least for Bitcoin.
With markets closed and BTC price action already at the edge of support, Arthur Hayes, former CEO of derivatives platform BitMEX, has designated this long weekend as a long day of calculation for crypto markets.
The reasoning seems logical. At the end of June, the Federal Reserve raised its key rates by 75 basis points, providing fertile ground for an adverse reaction from risk assets. Low liquidity “out of hours” holiday trading increases the potential for upward or downward price volatility. Combined, the cocktail, Hayes warned last month, could be potent.
“By June 30 (end of second quarter), the Fed will have enacted a 75 basis point rate hike and begun to shrink its balance sheet. July 4 falls on a Monday and is a federal and banking holiday,” he wrote in a blog post:
“This is the perfect setup for another mega cipher dump.”
So far, however, signs of what Hayes says is a “mad dash to the bottom” have not materialized. BTC/USD has remained virtually static since the end of last week.
The deadline is expected to be July 5, as the return of traders and their capital could provide the liquidity needed to stabilize markets as well as redeem cheap coins in the event of a last-minute downturn.
Hayes added that his earlier predictions of BTC/USD hitting $27,000 and Ether (ETH)/USD hitting $1,800 were already “in tatters” in June.
Mining difficulty continues to increase
Despite considerable concern about miners’ ability to withstand the current BTC price decline, Bitcoin the fundamentals of the network remain calm.
An impressive testament to the determination of miners to stay on the network, the difficulty is not expected to reduce during the next readjustment this week.
After dropping a modest 2.35% two weeks ago, the difficulty, which automatically increases and decreases to account for fluctuations in miner participation, will hardly change at all during this time.
According to estimates from on-chain monitoring resource BTC.com, the difficulty will increase even if current prices remain the same, adding 0.5% to what is a metric still close to all-time highs.
With regard to the miners themselves, opinions consider that it was the less efficient players – possibly newcomers with a higher cost base – who were forced out.
Data downloaded to social media by CEO of asset manager Capriole Charles Edwards last week estimated the cost of mass miner production at around $26,000. Of this amount, $16,000 is electricity, which means that miners’ overhead costs directly influence their ability to limit losses in the current environment.
“We traded below the cost of power in June, but the floor has since fallen as inefficient miners capitulate,” Edwards noted.
A sea of depressions
Bitcoin on-chain metrics pointing to record overselling is nothing new this year and especially in recent weeks.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, SHIB, MATIC, ATOM, APE
The trend continues in July, as the network returns to scenarios not seen since the aftermath of the March 2020 crossover crash.
According to on-chain analytics firm Glassnode, the number of coins spent at a loss is now the highest since July 2020. Glassnode analyzed the weekly moving average of unspent transaction outputs (UTXO) in a loss.
Similarly, UTXO’s percentage of earnings hit a two-year low of just over 72% on July 3.
Bear markets can produce welcome, albeit rare, silver linings. Bitcoin transaction fees, once painfully high during bullish periods of intense network activity, are now also at their lowest since July 2020. The median fee, Glassnode reveals, is $1.15.
As Cointelegraph reported, the same is true for Ethereum network gas fees.
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 conduct your own research when making a decision.