Bitcoin (BTC) starts a new week and month on a cautiously positive basis after protecting key levels.
After an intense July in which macro factors created significant volatility, BTC price action managed to deliver both a weekly and monthly candle that favored the bulls.
The path to some form of recovery continues, and at some points over the past few weeks, it seemed like bitcoin would suffer even more from June’s 40% losses.
There is now optimism among analysts, but one thing remains clear: this “bear market rally” does not mean the end of the tunnel.
As the summer of 2022 enters its final month, Cointelegraph takes a look at the potential market triggers in play for Bitcoin as it lingers near its highest levels since mid-June.
Spot price snaps back bear market trendlines
Things could have been a lot worse in terms of Bitcoin’s July performance.
After posting nearly 40% losses in June, BTC/USD ended the last month with respectable gains of 16.8%, according to data from analytical resource Coinglass.
Chart of monthly BTC/USD returns (screenshot). Source: coin jar
While those gains topped 20% at one point, July’s record nonetheless remains Bitcoin’s best since October 2021 – before hitting its recent all-time high of $69,000.
With a solid foundation, analysts are now wondering if and how long the party can go on.
Fun day!
On D, W, M, BTC closes D red. W&M closed in green and Trend Precognition fired a new long position on the M. It’s tentative until the candle closes, but the fact that it closed above the 50-month MA makes it interesting. time to relax. Back to the charts in the morning. pic.twitter.com/ImWjNcXx91
— Material Indicators (@MI_Algos) August 1, 2022
“First green monthly close since March,” responded popular trader and analyst Josh Rager.
“After the monthly close above the 2017 all-time high from the last cycle, the price is slowly increasing. Looking good so far and while this is a ‘bear market’ I’m happy to buy dips now.”
Others were more cautious, including fellow trader and analyst Crypto Tony, who noted that recent local highs just above $24,000 still acted as undisputed resistance on the day.
“I am looking for a breakdown of this Bitcoin pattern and remain short while we are below the $24K supply zone which we have rejected,” he confirmed to Twitter followers.
Nonetheless, the weekly and monthly close sealed some key levels as support for Bitcoin. Notably, the 200-week moving average turned from resistance on the weekly chart and BTC/USD held its realized price, data from Cointelegraph Markets Pro and TradingView shows.
In its latest weekly newsletter published last week, blockchain infrastructure and cryptocurrency mining company Blockware also noted that a 180-period exponential moving average (EHMA) reclaim closes at just under $22,000 on the monthly chart, “ would be pretty bullish.
“Monthly also appears to be recovering its 180-week EHMA, a level we’ve been talking about for the past few months as a macro accumulation area for BTC. This also closes Sunday night EST,” wrote Lead Insights analyst William Clemente.
“If there is a reclamation, that would be quite optimistic as failed collapses/breakouts are a strong signal.”
BTC/USD 1 week candlestick chart (Bitstamp) with 200 week moving average. Source: TradingView
Macro triggers cool for August
The macroeconomic picture at the start of August is one of relief mixed with a sense of suspicion about how the rest of the year might play out.
In short periods, US stocks weathered last month’s Federal Reserve-driven volatility and ended July on a high. As Cointelegraph reported, calls for an extended stock rally are mounting, which could only be good news for highly correlated crypto markets.
Meanwhile, popular Twitter account Game of Trades analyzed the state of commodities and predicted that oil would soon lose ground and that this would have a significant impact on US inflation.
The Consumer Price Index (CPI), currently at more than 40-year highs, is driving the Fed’s rate hikes, which are putting pressure on risk assets across the board. A turnaround in inflation and thus Fed policy could quickly turn the tables.
“Big sellers stepped in for oil on Friday,” read a post over the weekend.
“Looks like oil is about to collapse, taking CPI with it.”
Brent crude price tumbles as West eases efforts to curb Russian #oil trade amid rising inflation and energy risks. Plan to exclude Moscow from marine insurance market is delayed. https://t.co/fwQPGft0Uc pic.twitter.com/44Lne5P7qT
— Holger Zschaepitz (@Schuldensuehner) August 1, 2022
However, the global picture in terms of commodities is not so clear as macro analyst Alex Krueger conversely warns that the energy crisis in Europe has not yet impacted market prices.
So for Bitcoin, the current recovery is more of a “bear market rally” than a true return to strength.
“Yes, this is a bear market rally…for now,” Krueger wrote.
“The thing is, if inflation falls fast enough, which can be done, and Europe’s energy crisis isn’t exacerbated by a severe winter, which can be done, this could end up being the start of the bull market. Nobody knows until now.”
Krueger added that the status quo should remain in place until “at least late August” as new Fed events affect the market.
In order of importance, he listed the September interest rate decision, September CPI, the Fed’s Jackson Hole summit on Aug. 25, and the Aug. 10 CPI print for July.
The most important upcoming events in order:
#1 Sep22: FOMC
#2 Sep13: CPI
#3. Aug 25: Jackson Hole
#4 Aug 10: CPI
Expect markets to de-risk (sell off) in the days leading up to each event as the market heats up towards them.
Then of course we have the infamous ETH merger around September 19th.
— Alex Kruger (@krugermacro) July 30, 2022
As for US dollar strength, the US Dollar Index (DXY) remained at a low on the day not seen in almost a month, currently below 106.
For Game of Trades, the index was more meaningful than the numbers. A clear change in direction was now visible on the DXY daily chart after its parabolic uptrend.
“DXY has broken its parabola. There’s only one way a broken parabola ends,” she commented.
US Dollar Index (DXY) 1-day candlestick chart. Source: TradingView
RSI raises questions about the price bottom
As for on-chain signals, a rebound in any of Bitcoin’s core fundamentals hasn’t been enough to convince analyst Venturefounder that the BTC price bottom is in.
Zooming out to a multi-year view comparing BTC/USD across market cycles, the popular content creator argued that Bitcoin’s Relative Strength Index (DXY) is still subdued after peaking in April 2021.
The RSI measures how overbought or oversold BTC/USD is at a given price and has been at its lowest levels on record since May.
Although the RSI suggests Bitcoin is trading well below its fair value, it has yet to regain the “bullish momentum” that marked the run above $20,000 and beyond in late 2020.
In April 2021, Bitcoin hit $58,000 before halving in price by the end of July.
“The only way to see the July 2022 low as a cycle low is to see the April 2021 high as a cycle high for this cycle,” Venturefounder explained.
“Bitcoin and altcoins RSI and bullish momentum peaked in April 2021 and did not recover for the remainder of this cycle. Do you think we’ve bottomed out?”
Another noticeable oversold phase of the RSI came immediately after the COVID-19 crash in March 2020, with this event significantly impacting price strength ahead of the recent block subsidy halving.
Of course, BTC/USD never looked back and recaptured its then all-time high about six months later.
BTC/USD 1-month candlestick chart (Bitstamp) with RSI. Source: TradingView
Purpose ETF is finally adding stocks
Things could be looking up for institutional bitcoin holdings as subtle signs of recovery are playing out in the stats.
The latest such signal comes from the world’s first exchange-traded spot price Bitcoin fund (ETF), the Purpose Bitcoin ETF.
After its inventories suddenly dropped 50% in June, the product is finally adding BTC back, suggesting that demand is no longer falling.
Purpose added 2,600 BTC, which commentator Jan Wüstenfeld also noted, ended the multi-week dormant period.
“However, assets under management are still a long way from the all-time high,” he added.
Purpose Bitcoin ETF stock chart. Source: Glassnode
However, the recovery trend is far from ubiquitous. A look at the Grayscale Bitcoin Trust (GBTC) continues the pesky lack of demand trend.
The fund’s premium over spot, long at a discount, is now circling record lows of nearly 35%, data from Coinglass confirms.
Grayscale continues legal action against US regulators over its refusal to allow a spot Bitcoin ETF to launch in the domestic market. GBTC would convert to such an ETF if conditions allow.
GBTC Premium vs Asset Holdings vs BTC/USD chart. Source: coin jar
New month, new fear
It’s been a nice ride, but crypto market sentiment is already back in the “fear” zone.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, BNB, UNI, FIL, THETA
The latest readings from the Crypto Fear & Greed Index confirm that “neutral” sentiment can hardly last a day and that despite the prevailing high prices, cold feet are hard to shake.
The index stands at 33/100 on August 1st, still high compared to the last few months but already well below the highs of 42/100 of a few days ago.
Crypto Fear & Greed Index (Screenshot). Source: Alternative.me
For the research company Santiment, however, there is still reason for optimism. The company’s proprietary metric, which governs transaction volume relative to total network value for Bitcoin, ended in its own “neutral” zone in July.
The network value-to-transaction (NVT) token circulation model, after printing bullish divergences in May and June, thus came through at last month’s close.
“With a neutral signal now that prices are up and the token levy is slightly down, August can go either way,” Santiment summarized in a Twitter update of the latest figures.
Bitcoin NVT model. Source: Santiment/Twitter
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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