Additional feed rate increase coming, lower mining difficulty and improving market sentiment. The week promises to be turbulent for Bitcoin. Without further ado, here are 5 things to consider this week for the mother of cryptocurrencies. Elements that could easily be used on the crypto universe as a whole.
The FED continues to put all its weight on risky markets!
In her a frantic race against inflation, the US central bank will announce another rate hike. The market expects it to be between 75 and 100 basis points. And it could have new implications for equity markets such as digital assets. A fortiori if the measures are different from the expected measures. On July 26 and 27, the Fed’s FOMC must meet to make a decision. No one doubts that the announcements will guide the markets again this week. The July 27 session may well be marked by an increase in volatility in the crypto market.
For many observers, central banks today navigate troubled waters. Between the will to fight against inflation, but also the risk of recession weight on economies around the world. Today, monetary policy decisions seem to be the biggest factors influencing the price of risky assets like Bitcoin.
A few days ago, the European central bank imitated the American central bank, which then raised its rates by 0.5 basis points. The first in 11 years! It should be remembered that inflation has reached levels close to 10% in the United States, as in the euro area. An alarming level that has already prompted the FED to raise its rates by 75 basis points at the last meeting in June. An increase that has not been seen in such proportions since 1994. Although it has long been described as temporary, the rise in prices seems to invite itself further into the table of variables to be considered.
BTC mining difficulty drops again!
Bitcoin mining is necessary for the blockchain to function properly. The difficulty of mining, a it measures potential competition between minors adjusted according to network participation. The difficulty has been decreasing for almost a month. Feature partly due to the weakness in the price of Bitcoin. Low prices leading to declining interest in mining. And by adjusting, drop the difficulty of mining. This indicator is now reaching levels not reached since March.
Recently, the protocol reduced mining difficulty by 5%, the biggest drop announced since May 2021. Within ten days, another drop is also expected. It could be around 2%. The next few days are likely to be crucial.
Good to know: When the mining difficulty drops, it means that mining is less energy intensive since the competition from other miners is lower. If this seems like good news from an ecological point of view, it is not necessarily so for the Bitcoin ecosystem.
Despite the extremely low price of Bitcoin, the desire or need for sellers to resell is still present. As data from CryptoQuant shows, miners sent 909 BTC to the markets during yesterday’s session. This is the highest number since June 22nd, despite the 5% difficulty drop.
The battle against the 200-week moving average!
Over the past week, Bitcoin has seen a stronger performance in recent weeks. But that was not enough to permanently overcome a significant level: 22,800 dollars, the moving average over 200 weeks. As shown in the chart below, taken from the Tradingview platform:
If this level is crucial for some people, for others, the passage above this moving average would have little effect. It is in any case the opinion of the Crypto Chase Twitter account that considers if this will succeed level of resistancethe increase would remain relatively small.
MVRV-Z Bitcoin Score
The MVRV-Z (Market Value to Realized Value) score measures the difference between an asset’s current and realized value. In other words, it is a matter of evaluation whether an asset is overbought or oversold relative to its “fair price”. Among traders, this indicator is often used like other similar variables.
During the day, this score went back to negative, which could suggest a price drop. And it hasn’t failed since Bitcoin fell 3.51% in the last 24 hours. In the coming days, investors will keep a close eye on this indicator. At the beginning of July, the Cointelegraph platform published a report on this indicator applied to Bitcoin. It seemed then that there was a risk of returning to the threshold of 15,600 dollars for the mother of cryptocurrencies.
The importance of market sentiment!
This variable seems to be giving positive signals for a few sessions. Although it is well below 10/100, the Crypto Fear and Greed index is coming back in color for a few days. Recall that during this bear market it was for 73 consecutive days in the “Extreme Fear” category, ie a level between 0 and 25/100. In mid-June, it even reached the threshold of 6/100. index for the last 3 months:
It shows that the indicator is emerging at levels not reached in almost 3 months. Although the high point was reached at the end of last week. At the time of this writing, this index is of a measure of market sentiment Although it is still a “Fear” level, hope seems to be returning. This week again, it will be a variable to consider.