Will BTC Lose $21,000 Despite Miner Capitulation? 5 Things You Need to Know About Bitcoin This Week

Bitcoin started the new week off multi-week lows amid the return of high jitters.

After falling below $21,000 over the weekend, Bitcoin is consolidating and is about 10% lower than it was a week ago, with fear clearly visible across the crypto market.

While some call for new lows and others warn of a difficult few months ahead, the bulls have a lot to wrestle with in the long and short term.

With the Fed's annual Jackson Hole symposium taking place this week, September is shaping up to be a showdown when it comes to inflation and related macro price triggers.

This could mean fresh volatility across risk assets in September and beyond, something weary investors will certainly not welcome after last week's BTC/USD plunge.

Meanwhile, miners are sending strong signals that the worst is over, with hashrate starting to bounce back from a rare "surrender" phase.

With this in mind, Cointelegraph took a closer look at five market-moving topics relevant to Bitcoin traders in the coming days and beyond.

All eyes on Jackson Hole

This week, the Fed once again has the upper hand when it comes to potential macro price triggers for risk assets.

After last week's Federal Open Market Committee (FOMC) meeting, Fed officials will join bankers around the world for the annual Jackson Hole symposium on Aug. 25-27.

This year's conference comes at a pivotal time for markets in the U.S. and other countries. Inflation appears to have started to cool under the Fed's purview, while elsewhere the opposite remains true.

The latest U.S. inflation data is weeks away, but that likely won't stop Federal Reserve Chairman Jerome Powell from giving strong hints about how the central bank will respond and positioning expectations for future economic policy.

With that in mind, volatility can easily occur both before and during the meeting, making Jackson Hole a key event for traders to watch.

Kevin Cummins, chief U.S. economist at NatWest Markets, told Bloomberg: "Part of the reason they're so focused on doing this is they screwed up the whole 'temporary' thing last year and they realize the only thing they can do now is It’s tightening policy, which will slow inflation.”

In this case, it remains to be seen whether the market favors another 75 basis point hike in September, or a 50 basis point hike.

In a preview of the Jackson Hole meeting circulating online, Bank of America said it would "continue to look forward to 50 basis point rate hikes in September and November, and another 25 basis point rate hike in December."

The rate hike itself has created headwinds for risk assets, which in turn has created challenges for Bitcoin and its attempts to shed its strong correlation with asset classes like U.S. stocks.

Fed funds rate chart (screenshot) Source: Federal Reserve

Bitcoin Set for an 'Ugly' 6 Months

Bitcoin managed to avoid major volatility over the weekend, but still hit fresh August lows as low trading volume over the weekend fueled market volatility.

After the sudden drop on Aug. 19, BTC/USD has been consolidating at lower levels in the ensuing days, which continues at the time of writing.

Bitcoin fell to $20,770 on Bitstamp before gaining another $1,000 before returning to trade roughly midway between those two levels.

It closed the week at $21,500, its lowest level since the week of July 18. Last week's close cost bulls nearly $3,000 (11.6%).

It feels like Bitcoin will be back below $20,000 soon.
Don't be caught off guard.
— Ben Armstrong (@Bitboy_Crypto) August 21, 2022

Commentators' concerns about new lows are evident, while others argue that the situation doesn't clearly point to further pain.

Cointelegraph contributor Michaël van de Poppe said that BTC/USD may limit any decline in CME (Chicago Mercantile Exchange) futures from the close on August 19. He suggested that the more difficult situation for most people in the market is to rise, because the overall tendency is to enter the market on the downside.

"Probably around the CME open we'll see the market drop to $21,200 as that's Friday's close and then everything will be fine," he told followers on Twitter over the weekend:

"We're still not inclined to see new lows. The whole accumulation period and Friday's sharp pullback caused panic. The pain is on the rise."

BTC/USD 1-hour candle chart (Bitstamp) Source: TradingView

In the long run, however, Brian Beamish, founder of education suite The Rational Trader, told social media to leave no illusions about how Bitcoin will fare in the rest of 2022.

"The next 12-19 weeks will be ugly," read one tweet.

"Once it's over, the bottom of the cycle will be there - and then we'll start all over again."

Beamish draws on the experience of the previous two crypto bear markets, and the price action comparison chart shows that the actual macro lows for BTC/USD are far from coming.

Still, analyst Matthew Hyland is equally confident about a longer-term recovery, and he doesn't think traders should lose faith.

“Bitcoin structure over the next few weeks/months shouldn’t scare you. Either higher lows, double bottoms, or cycle lows,” he concluded.

"The end is very near."

BTC/USD 1-week candle chart (Bitstamp) Source: TradingView

Hashband shows miners out of capitulation phase

Among the participants in the Bitcoin network, one group that appears to be coming to an end is the miners.

Despite the recent price drop, on-chain data shows that Bitcoin miners have collectively exited a “capitulation” period that lasted more than two months.

Hashband uses two moving averages of the hash rate to determine trends in miner participation, an indicator that shows that a rally is now forming.

The move had long been expected. Earlier in August, mining firm Blockware predicted that the hashbelt capitulation phase would end this month or next.

The latest change was noticed by Charles Edwards, CEO of asset management firm Capriole, who compared this year's miner capitulation to other situations in Bitcoin's history.

“Bitcoin miner capitulation officially ends today, after 71 days, the third longest capitulation period in history,” he tweeted.

“This surrender zone is longer than it was in 2021 and just two days shorter than it was in 2018 when prices hit $3.1 million.”

A look at hash rate estimates via monitoring resource MiningPoolStats shows that it may have started to exceed 200 EH/s in recent days.

Edwards continued: “Historically, Bitcoin’s miner capitulation has caught major price lows and is a good buy signal, with price following hashrate.”

"Miner capitulation that occurs late in the cycle (at least 2 years after the halving) and after the cycle top is the most profitable long-term signal (eg, 2012, 2015, 2018)."

Bitcoin hash graph source: LookIntoBitcoin

Exchange balance hits 4-year low

Short-term price struggles have proven to be less of an issue for buyers.

Behind the scenes, far from fleeing Bitcoin exposure, investors have poured into the market at a noticeable pace in recent days.

According to data from on-chain analytics platform CryptoQuant, the number of bitcoins available on 21 major exchanges dropped to 2,309,727 on Aug. 18 from 2,342,662 on Aug. 22.

Within 4 days, exchange users removed more than 30,000 bitcoins from their accounts.

Chart of exchanges’ Bitcoin reserves Source: CryptoQuant

Meanwhile, another data firm, Glassnode, added that the current total balance across the exchanges it monitors hit a four-year low on Aug. 22.

In contrast, in August 2018, BTC/USD climbed to $7,000, but is still months away from the bear market bottom of $3,100.

Exchange Bitcoin balance graph Source: Glassnode/Twitter

Sentiment index down 40% in a week

At the same time, market sentiment is not what it used to be before the price drop.

Despite the accelerated departure of Bitcoin from exchanges, the overall picture is now one of firm “fear” for Bitcoin and altcoin investors.

According to the Crypto Fear and Greed Index, which uses a basket of factors to provide a standardized score for market sentiment, "extreme fear" is just one step away.

Currently at 29/100, the index is still 4 points away from returning to extreme fear territory. 45/100, the most optimistic level since April.

Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me