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Following days of losses after the most recent inflation data from the United States, Bitcoin faces another week of significant macro developments. BTC/USD, (1) along with altcoins and risk assets more generally, have also failed to rebound since the lowest weekly finish in July. As the third full week of September began, the biggest cryptocurrency has yet to cross $20,000 for compelling support, and there is once again a risk that the level may act as resistance.
The Federal Reserve will determine the next significant rate hike in the coming days, which will have an impact on the market that goes far beyond sentiment alone. In addition, the Ethereum Merge (2) is still in progress, and at the defunct exchange Mt. Gox, payments to creditors are being made, which could add another potential risk to the Bitcoin price landscape.
The Federal Reserve's decision (3) on the key interest rate is this week's primary event, but after the Consumer Price Index report for August came in hotter than anticipated, the Fed will face pressure to act. The market, which has already completely priced in a Fed funds rate increase of at least 75 basis points, is now discounting the possibility of an increase of 100 basis points.
The Federal Open Market Committee (FOMC) (4) is scheduled to meet on September 20–21 and will issue a statement confirming the rate hike and Fed support for the figure involved. whereas a 100-point increase would be the Fed's first such action since the early 1980s. The Fed won't be at ease for very long since it's typical human nature and because users now have the advantage of understanding how far the error of relaxing too much has gone.
It is now extremely evident that a reversal in the expansion of risk assets since the March 2020 catastrophe will occur since the trend has swung too far to one side. As the cryptocurrency market adjusts overall, Bitcoin will ultimately beat gold, but for both, the pain will come first. Risk assets will have to tighten for them to block the Fed from ceasing this sledgehammer, which is terrible for the Fed.
A 100-basis-point increase would speed up the process, which is now being sped up by central banks outside the United States after they initially took their time raising interest rates to combat inflation. According to the popular Twitter account Games of Trades, the S&P 500 was in "crunch time" before the opening of Wall Street trading (5).
The crypto market may not be able to accomplish much in such times without approval from equities, as the preceding week saw tailwinds building up for Bitcoin, which caused BTC price action to fail in kind. In such circumstances, there is uncertainty across the board. The weekly candle for BTC/USD lost nearly $2,000, finishing below $20,000, the lowest close since July. The close was followed by a rapid decline in which the pair plummeted below $19,000.
The Ethereum Merge turned into a sell-the-news event, which together with macro triggers, contributed to a new risk asset flight. As a result, analysts are currently assessing the likelihood that the downtrend will persist at least until the Fed rate announcement has passed. BTC has fluctuated throughout the weekend, but there is always a chance for some volatility before the closure because next week's significant economic and FED developments may heat things back up.
The Binance order book was supporting about $19,800 due to failing to sustain price action, and there was also little value in picturing a larger loss to be avoided. Additionally, order book bidding action indicated that support at current levels was still lacking.
Since short positions were building up at the time of writing on both Binance and FTX, it appeared that derivatives traders were making a concerted effort to drive the market lower. When predicting when a macro bottom may occur, traders are placing their bets on Q4 of this year (6), describing Bitcoin as being on track to do so as $BTC weekly prices have started to press range lows.
The US Dollar index (DXY) (7) is currently hovering at a little around 110 after a few days of consolidation, with investors keeping an eye on potential macro highs while the U.S. dollar recovers from losses seen the post-CPI report as a traditional headwind for cryptocurrencies. The index then had major retracements before reaching 110.78, its highest level since 2002.
Although a glance at the negative correlation between DXY and BTC/USD indicates that there have been dramatic higher rises of the former on the latter, the fresh blow-off peak for DXY would accompany a capitulation event in risk assets.
While ETH is witnessing a significant decline this week and following the much-heralded Merge, the move may help tilt the market cap share back in favor of Bitcoin, with ETH/USD down 25% last week. The pair is currently around $1,300, its lowest price since July 16, and all analysts and traders are predicting further declines.
The weekly closure failed to put a stop to the losses for Ethereum, and in the meantime, it set a target price of $1,000 for ETH/USD and added that $1,250 to the price as some support.
While Bitcoin's percentage of the total cryptocurrency market cap increased by 1.2% since September 14, Ethereum was down up to 19% against BTC over the week, and everything was still lining up for a generational entry or opportunity on the pair. While ETH/USD was still trading above its 200-week moving average (WMA) at the time of writing, Bitcoin was trading below its equivalent.
While recent price volatility has seen an uptick in on-chain activity, the 200 WMA serves as a crucial trendline during crypto bear markets and is reclaiming it after its loss as support has historically signified a return to strength. On-chain data has confirmed this, as coins held for at least five years are showing just one trend.
The amount of supply the last active between five and seven years ago hit its highest in nearly two years: 1.01 million BTC. At the same time, "younger" coins are also on the move, with 6-12 month brackets seeing five-month highs on their own. According to Glassnode (8), the percentage of BTC supply last active in September 2017 reached a new all-time high of 24.8%.
About Bitcoin, the supply percentage owned by long-term holders (LTHs) is conclusive evidence of the long-term trend among seasoned investors. LTH supply is the volume of Bitcoin that hasn't been used in 155 days and is hence statistically less likely to be spent during periods of market turbulence.
While the indicator reached record highs of 13.62 million BTC last week, after the CPI event, Bitcoin flows to exchanges witnessed their highest single-day total in several months.