Bitcoin is heading into the first week of September on a bumpy decline after the Jackson Hole conference crashed U.S. markets.
Cryptocurrencies are still reeling from the fallout from a broad sell-off in risk assets after the Federal Reserve stepped up its hawkish comments on the inflation outlook.
A fairly stable weekend has not improved market sentiment, and BTC price action has returned to the sub-$20,000 region.
As a result, the weeks-long upswing has effectively disappeared, leading traders and analysts to expect Bitcoin to retest the macro lows of June this year.
While all is quiet about the Fed ahead of the September rate hike decision, there is still plenty of room for jitters as geopolitical uncertainty and inflation persist (inflation in Europe is still rising).
However, just like last week, Bitcoin as a network appears to be fundamentally resilient, with on-chain data and price charts telling a different story.
Cointelegraph looked at the following five factors when considering where BTC/USD could go in the coming days.
Data from Cointelegraph Markets Pro and TradingView confirms that it is not surprising to speculate on where BTC/USD will end the latest week.
After a relatively quiet weekend, BTC/USD ended Aug. 28 with a sharp sell-off, recording its lowest weekly close since early July.
The $2,000 drop capped a miserable August for the bulls, after losing $3,000 a week earlier.
BTC/USD weekly candle chart (Bitstamp) source: TradingView
With a few days until the monthly close, analysts are understandably less bullish in the short-term.
"Hopefully we'll see a recovery this week, but the way stocks closed last Friday didn't look that good," trader Josh Rager concluded to his Twitter followers as part of a weekend update.
Still, popular trading account Il Capo of Crypto sees the potential for a brief upside squeeze before the downtrend continues.
Noting that negative funding rates mean that derivatives markets tend to favor outright losses, he predicts that $23,000 may be the first to resurface.
Trader Mark Cullen responded that traders "added more BTC short positions in the region between $20,100 and $20,300."
In a forecast of $17,000 or lower, technical analyst Gert van Lagen has a minimum price target of $17,500 on the daily chart.
Meanwhile, TMV Crypto sees $18,400 as an area to watch on the long-term frame.
Last week, a blockbuster speech from Federal Reserve Chairman Jerome Powell sent shockwaves through global risk assets.
According to statistics, Powell's 8-minute speech wiped out more than US$2 trillion from global stock markets, of which the US stock market alone accounted for US$1.25 trillion.
"At some point, as the stance of monetary policy tightens further, it may be appropriate to slow down the pace of rate increases," Powell said.
"Restoring price stability may require maintaining a restrictive policy stance for some time. The historical record strongly cautions us against premature policy easing."
Both Bitcoin and altcoins have been squeezed, and Aug. 29 will be the deciding factor in Wall Street's trading session.
Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, warned in an interview with Bloomberg TV that U.S. stocks will fall further, with the S&P 500 falling below 4,000 next.
On the other hand, cryptocurrency-focused Game of Trades argues that July’s inflation peak already signaled a macro low for stocks.
All things are actually not as bad as it seems, Game of Trades continues, thanks to the accumulated data from the S&P.
"The SP500 is showing a lot of underlying strength," wrote Game of Trades in a weekend review.
"The cumulative advance/decline line speaks to the underlying strength of the market, which many investors don't notice. Although the SP500 is still double digits away from its all-time high, the indicator has entered new highs."
Another point of view is that even a drop to 3900 points will maintain a "bullish pattern".
A key factor accompanying the stock market turmoil remains a stronger dollar this week.
The greenback's performance relative to risk assets came into focus as the U.S. dollar index (DXY) hit a fresh 20-year high this week, a classic negative correlation.
As of writing this article on August 29, those highs are still in play, with DXY touching 109.47, the highest since September 2002.
US Dollar Index (DXY) 1-hour candlestick chart Source: TradingView
"Things are going to get really bad if the dollar keeps going higher. It's actually gone parabolic," echoed Raoul Pal, founder of Global Macro Investor, warning that in terms of resistance on the DXY chart, "at 120 There was virtually no resistance before."
Cointelegraph contributor Michaël van de Poppe was similarly alarmed, citing DXY as a factor in creating a "moment of truth for the entire crypto market."
The surge in the dollar also caused pain to the major fiat currencies, with the euro quickly falling back below 1:1 against the dollar on August 29.
The European Central Bank and the Bank of Japan have been reluctant to initiate rate hikes like the Fed, causing inflation to continue to climb over the summer.
EUR/USD 1-hour candlestick source: TradingView
A return to its "buy" zone is a classic indicator of Bitcoin's strength, and it has reached a macro bottom throughout Bitcoin's lifetime.
The MVRV-Z score gauge, which began preparing analysts for a price bottom in July, is now down again, hitting its lowest level in a month.
Bitcoin MVRV-Z Score Chart Source: LookIntoBitcoin
MVRV-Z uses market capitalization and realized prices to determine how far BTC/USD is from its "fair value".
In July, it showed a potential BTC price floor at $15,600 and briefly exited the buy zone before returning in the second half of August.
As Cointelegraph reported, data from on-chain analytics firm Glassnode confirmed that realized price — the average price of the last movement of BTC supply — is now sitting around $21,600.
Bitcoin Realized Price Chart Source: Glassnode
Perhaps unsurprisingly, Bitcoin’s return to below $20,000 has brought its key market sentiment indicator back to its most bearish.
As of Aug. 29, the Crypto Fear and Greed Index is back in the "Extreme Fear" zone at 24/100.
The index hit 47/100 during the rally and is now in a characteristic range for several months into 2022.
This year even saw the longest period of "extreme fear" on record, with overall market sentiment scoring just a low 6/100.
Crypto Fear and Greed Index (screenshot) Source: Alternative.me
However, by analyzing investor sentiment, on-chain research firm Santiment noted that large numbers of investors are accumulating rather than withdrawing.
“With Bitcoin hovering around $20,000 this weekend, the growth in the number of key whale addresses is a positive sign,” it commented on an August chart.
"There is a correlation between the price of BTC and the number of addresses holding between 100 and 10,000 BTC, which has increased by 103 over the past 30 days."
Still, others believe there is still some way to go before cryptocurrency demand reaches a true macro inflection point.
"The real generational entry is not just when people are afraid to buy, but when they are too poor to afford it," admits Material Indicators, an on-chain analytics firm.
"Not quite there yet."
Bitcoin whale address growth annotation map Source: Santiment/Twitter
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