Bitcoin started giving positive signals over the past week and managed to rise as much as 7%. Even so, news about the Fed’s rate hike still provides uncertainty. The Pintu Trader team has collected various important data about the price movements of the crypto market over the past week. In this Market Analysis, you can study the price movements of Bitcoin and other crypto assets, as well as find out the latest updates in the industry. All information from the market analysis is for educational and informational purposes, not financial advice.
The Fed’s interest rate is now in the 1.50%-1.75% range, and the 12-month federal funds futures have jumped to 3.44% in anticipation of additional rate hikes to come. Treasury bond yields also increased. In addition, the six-month Treasury bill now has a yield of 3.04%, and the three-year Treasury note at 2.51%.
The biggest reason for the recent rise in the US dollar is that the Fed has been more hawkish than the European Central Bank since the start of the year. The euro alone has fallen more than 13% against the USD year-on-year. The Fed is expected to raise interest rates by 75bps (0.75%) on the 27th of this month. The ECB said it would only raise interest rates by 25bps (0.25%). In addition, the Yen is also down 20% YoY against the USD, with their government continuing its easy money policy.
💡 What are hawkish and dovish?
Hawkish and dovish are two terms that refer to the government’s monetary policy sentiment. Hawkish sentiment tends to focus on controlling inflation as a monetary policy. Meanwhile, dovish focus on policies that promote economic growth and employment.
With quantitative tightening (QT) continuing the hawkish sentiment, the Fed will continue to reduce its balance sheet. Starting June 1, the Fed began releasing approximately 47.5 billion securities, 30 billion Treasuries, and approximately 17.5 billion mortgage-backed securities per month. However, in September this figure will raise to a total of $95 billion dollars per month. This number is double that of QT 2017–19. The Fed estimates that the value of QT in one year is roughly equivalent to a 25bps rate hike.
Over the week, we can see BTC rise from $20,500 to $23,000 US dollars. Bitcoin looks like it’s about to break through the resistance of the current price range and go up but this seems to be a false signal and it’s back down again. So, BTC is likely to stay within its current price range for quite a while, unless it manages to break through resistance or fall from support. As discussed earlier last week, market fluctuations are very risky to trade. A better strategy is to do DCA (dollar cost averaging) because trading in this market situation is similar to a coin toss, with a higher risk of getting burned.
Notice in the chart below, when we are below the 55-day MA line, BTC often moves sideways. If BTC breaks this resistance line ($22,763 dollars), we will see a possible reversal of the downside momentum in the short term.
In 2019, we can see that even after crossing the resistance line, BTC experienced several weeks of sideways movement before shooting upwards.
In 2020, we can see a big change in the trend after breaking this resistance. Just like before, the market moved sideways before finally rising.
On the weekly chart, we can see that BTC is still below the 200-week MA. If we manage to break through this resistance point, it will be an important signal for BTC.
In the monthly chart, we can see that BTC is above the 50-month MA line. This point has historically been an accurate indicator for predicting market bottoms and turning points for bear markets. Therefore, we need to watch the price at the end of July because BTC never closes below this support line.
Read more: 4 crypto trading indicators
DXY, the dollar index found support in the 21-week EMA. Most likely we will see further gains in the DXY given that the FOMC rate hike will occur at the end of this month. So, the long-term trend is still up.
Notice the correlation between the YoY BTC and DXY price, there is a clear inverse correlation between the two. Unless we see a peak in inflation occur, with the Fed starting to reverse QT (Quantitative Tightening), the sideways market will continue.
📊 Exchange: On a weekly basis, the reserves of most exchanges remain the same, indicating no particular buying or selling pressure. Net deposits on the exchange are low compared to the 7-day average. This can indicate lower selling pressure.
⛏️ Miners: Miners sell holdings in a moderate range compared to their one-year average. Miners’ income has decreased significantly compared to the costs they need to pay. This can indicate that the price is undervalued as the miners’ motives to hold their assets increase.
🌐 On-Chain: More investors selling at a loss. It can show the bottom line of the market in the middle of a bear market. The movement of long-term holders in the last 7 days is lower than average. They have a motive to hold their assets. Investors are in a fear phase where they currently have slightly more unrealized gains than losses.
🏦 Derivatives Market: Short traders are still dominant and willing to pay long traders. Buying sentiment is dominant in the derivatives market. When OI (open interest) increases, it indicates more liquidity, volatility, and attention is coming into the derivatives market. The upward trend in OI can support the ongoing price trend.
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