Bitcoin started the new week and new month on a cautiously positive note after holding key levels.
After a volatile July brought on by macro factors, bitcoin price action provided a bullish weekly and monthly close.
The road to recovery of some kind continues, and at some point in recent weeks, it looked like Bitcoin would suffer even more from its 40% drop in June.
However, now that analysts are in for optimism, one thing remains clear - this "bear market rally" does not spell the end of darkness.
As summer 2022 enters its final month, with Bitcoin hovering near its highest level since mid-June, Cointelegraph provides an analysis of Bitcoin's potential market triggers.
Things could have been much worse in terms of Bitcoin’s performance in July.
After falling nearly 40 percent in June, BTC/USD closed the month with a respectable 16.8 percent gain, according to analytics resource Coinglass.
BTC/USD monthly rise and fall chart (screenshot) Source: Coinglass
While those gains topped 20% at one point, the July figures still marked Bitcoin's best performance since October 2021 -- ahead of its latest all-time high of $69,000.
With solid ground in place, the question for analysts now is whether and how long the rally can continue.
Prominent trader and analyst Josh Rager responded: "This is the first monthly close since March."
“Prices are slowly creeping higher after a monthly close above the 2017 all-time high. So far looking good, even if it’s a ‘bear market’, I’m happy to buy on dips right now.”
Others are more cautious, with trader and analyst Crypto Tony noting that the recent high of just above $24,000 remains an unchallenged resistance level for the day.
He confirmed to his Twitter followers: "I am looking for a breakdown in this form of Bitcoin, continuing to be short in the supply range below our rejection of $24,000."
Still, the weekly and monthly closes provide some important support levels for Bitcoin. Data from Cointelegraph Markets Pro and TradingView shows BTC/USD retaining its realized price as the 200-week moving average on the weekly chart flips from resistance to support.
Blockchain infrastructure and cryptocurrency mining firm Blockware also noted in its latest weekly newsletter published last week that a retracement of the 180-week exponential hull moving average (EHMA) just below $22,000 on the monthly chart would " Pretty bullish."
"The monthly line also appears to be reclaiming its 180-week EHMA level, which is the level of BTC's macro accumulation area we have discussed in the past few months. This is also the closing price on Sunday night ET," wrote lead analyst William Clemente road.
BTC/USD 1-week candle chart (Bitstamp), 200-week moving average Source: TradingView
The macroeconomic picture that started in August has been a relief, but it has also created a sense of mistrust about how the rest of the year will play out.
In the short term, U.S. stocks have weathered last month's Fed-induced volatility, ending July at a high. As Cointelegraph reported, calls for a sustained stock market rally are growing, which could be good news for the highly correlated cryptocurrency market.
Meanwhile, the popular Twitter account Game of Trades, analyzing the commodity situation, predicted that oil prices will soon drop, which would have a significant impact on inflation in the US.
The consumer price index (CPI) is currently at a high in more than 40 years, which is why the Fed's rate hikes are putting pressure on risk assets across the board. Inflation and a reversal in Fed policy could quickly turn things around.
"Big sellers stepping into oil trades Friday," read one tweet over the weekend.
"Oil prices look like they are about to crash, and CPI will fall with it."
However, the global situation in commodities is not that simple, with macro analyst Alex Krueger conversely warning that Europe's energy crisis has yet to be priced in by markets.
Therefore, for Bitcoin, the current recovery is more like a "bear market rally" than a real return to strength.
"Yes, this is a bear market rally ... for now," Krueger wrote.
“The thing is, if inflation falls fast enough that it’s doable, and Europe’s energy crisis isn’t exacerbated by a severe winter, it’s doable, and that could end up being the start of a bull market. Nobody knows yet.”
Krueger added that the current situation should remain in place "until at least the end of August," when the Fed's new move will affect markets.
In order of importance, he listed the key interest rate decision in September, the CPI in September, the Jackson Hole summit of the Federal Reserve on August 25, and the CPI data for July announced on August 10.
On the greenback front, the U.S. dollar index (DXY) remains at near one-month lows today, currently below 106.
For Game of Trades, indices are more important than numbers. After a parabolic uptrend, a clear change in direction can now be seen on the daily DXY chart.
US Dollar Index (DXY) 1-day candlestick source: TradingView
Speaking of on-chain signals, a rally in one of Bitcoin’s core fundamentals isn’t enough to convince analyst Venturefounder that the price of Bitcoin has bottomed out.
Taking a longer view and comparing BTC/USD across different market cycles, the popular content creator argues that Bitcoin's relative strength index (DXY) remains subdued after peaking in April 2021.
The RSI, which measures how overbought or oversold BTC/USD is at a certain price level, has reached an all-time low reading since May.
While the RSI suggests that Bitcoin is trading well below its fair value, it has yet to resume the "bullish momentum" that characterized a breakout above $20,000 and beyond in late 2020.
In April 2021, the price of Bitcoin will reach $58,000, and then the price will be halved by the end of July.
"If the July 2022 low is considered the bottom of this cycle, then the only way to see it is to see the April 2021 high as the top of the cycle," said the Venturefounder.
“Bitcoin and altcoin RSI and bullish momentum peaked in April 2021 and never recovered for the remainder of the cycle. Do you think we have bottomed yet?”
Another notably oversold period on the RSI followed the COVID-19 crash in March 2020, an event that significantly impacted price momentum heading into the latest block reward halving.
Of course, BTC/USD didn’t look back and revisited its all-time highs at the time about six months later.
BTC/USD January candlestick chart (Bitstamp), RSI Source: TradingView
Institutional participation in bitcoin trading may be on the mend as data show subtle signs of recovery.
The latest such signal comes from the Purpose Bitcoin ETF, the world's first bitcoin spot price exchange-traded fund (ETF).
After a sudden 50% drop in holdings in June, the product has finally added BTC again, suggesting that demand is no longer falling.
Purpose added 2,600 BTC, which commentator Jan Wuestenfeld also noted ended a period of several weeks of dormancy.
But he added: “Assets under management remain well below record highs.”
Bitcoin ETF position map source: Glassnode
However, the recovery trend is not everywhere. A look at the Grayscale Bitcoin Trust (GBTC) reveals that the troublesome trend of lack of demand persists.
Data from Coinglass confirms that the fund's premium to the spot price (indeed, it has long been a discount) is now hovering near an all-time low of minus 35%.
Grayscale continues to take legal action against U.S. regulators for refusing to allow a bitcoin spot ETF to list on the U.S. market. If approved, GBTC will be converted into an ETF.
GBTC Premium vs. Asset Holdings vs. BTC/USD Chart Source: Coinglass
It's been a good ride, but crypto market sentiment has returned to "fear" territory.
The latest reading from the Crypto Fear and Greed Index confirms that "neutral" sentiment can barely last a day, with fears hard to shake despite rising prices.
At 33/100 as of August 1, the index is still high compared to recent months, but well off the high of 42/100 a few days ago.
Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me
For research firm Santiment, however, there are still reasons for optimism. The firm's proprietary metric, which manages bitcoin transaction volume relative to the overall network value, was in its own "neutral" zone at the end of July.
“With prices rising and tokens in circulation slightly down, there are now neutral signals that August could move in either direction,” Santiment concluded in a Twitter update on the latest data.
Bitcoin NVT model source: Santiment/Twitter
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