Will the Fed prevent the price of BTC from reaching $28,000? 5 things to know about Bitcoin this week

Bitcoin (BTC) is entering a new week with a question mark over the fate of the market ahead of another major decision on US monetary policy.

After a successful weekly close – its highest since mid-June – BTC/USD is getting more cautious as the Federal Reserve prepares to raise benchmark interest rates to fight inflation.

While many had hoped that the pair could break out of its recent trading range and continue higher, the Fed’s heft is clearly visible as the week begins, adding pressure to the already fragile risk assets landscape.

This fragility is also shown in the fundamentals of the Bitcoin network as the mining strain becomes real and the true cost of mining through a bear market emerges.

At the same time, there are encouraging signs from some metrics on the chain that long-term investors are still refusing to give up.

Cointelegraph takes a look at the potential market drivers for the week in a tense week for cryptocurrency, stocks, and more.

Fed makes decision on next rate hike in ‘another fun’ week

Story of the week, all things being equal, the Fed has no doubt raised interest rates.

Familiar anecdote, the FOMC on July 26-27 will see policy makers decide on the next rate move. It is likely to be either 75 or 100 basis points.

Inflation in the United States, as in many jurisdictions, is at its highest levels in forty years, and its advance appears to have surprised the establishment as calls for a peak have been met with larger gains.

“It should be another fun,” said Blockware Insights analyst William Clemente Summarization On July 25.

The interest rate decision is scheduled for July 27 at 2:00 PM ET, a diary date that could be accompanied by increased volatility across risky assets.

One analyst warned that this is likely to be exacerbated, thanks to lower summer liquidity and less conviction among buyers.

“ECB/FOMC/Tech Earnings Entered Amid Lowest Liquidity of the Year. Market Returned to Overbought Zone. Bulls, Let It Ride, Mac10 Twitter Account Wrote.

One of the previous publications also pointed to second-quarter earnings reports as likely to contribute to a downward movement in line with previous behavior.

“Bitcoin Assets and Risk Rises Up at FOMC Events This Year, Only to Sell After That, Is It Different This Time?” Account Analysis Fellow Tedtalksmacro continued:

“The June FOMC meeting saw the US Federal Reserve raise 75 basis points – the largest single rise since 1994. Significant hikes are expected before inflation ‘normalises’.

The week already appears to be different from last, even before the events began to unfold – Asian markets are flat compared to last week’s bullish tone, which accompanied the recovery across Bitcoin and altcoins.

While one argument is that the Fed cannot raise interest rates much more without hurting the economy, meanwhile, Tedtalksmacro has pointed to the labor market as a goal to keep rates high.

“Bitcoin will struggle to cross 28,000 until the data deteriorates,” he said added.

Spot price failed to fix the main moving average

Bitcoin’s recent weekly close was a halfway house for the bulls, data from Cointelegraph Markets Pro and TradingView show.

While managing its best performance in over a month, BTC/USD lost ground to a reclaim of the basic 200-week moving average (MA) at $22,800.

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

After the close, which came in at around $22,500, Bitcoin has started to drop below its recent trading range, still remaining below $22,000 at the time of writing.

“Watching if we find support at $21,666 horizontally. Patience” popular trader Anbaisa Tell Twitter followers in its latest update.

In the meantime, a colleague Crypto Chase account suggested that a return to the 200-week moving average would lead to a further modest rally.

“Cutting around the daily S/R (red square) with the inability to flip 22.8K (daily resistance) support. Multiple attempts to do so, but so far failed,” he Wrote Next to the diagrams:

“If the price goes higher again and finds acceptance, I will watch 22.8K become support for a potential buy entry at 23.2K.”

Later update eye $21,200 as a potential downside target, and this is also a support/resistance level on the daily chart.

However, at $21,900, bitcoin is still around $1,200 higher against the same point last week.

BTC/USD 1-week candlestick chart (Bitstamp) with a 200-week moving average. Source: TradingView

Elsewhere, recent price action hasn’t been enough to change long-term views. For Venturefounder, a contributor to on-chain analytics firm CryptoQuant, a macro bottom has yet to appear, and it is likely to reach $14,000.

“Consistent with previous halving cycles, this is still my most viable prediction for Bitcoin ahead of the next halving: BTC will give up in the next six months and hit the bottom of the cycle (anywhere between $14-21K) and then break out at 28-40K. at most in 2023 and will be at ~$40,000 again by the next half,” a prediction originally retweeted from June repeat.

Difficulty returns to March levels

In a sign that miners’ problems due to weak prices may have just begun, the turmoil is now visible across the Bitcoin network.

Difficulty, a measure of competition among miners adjusting itself for participation, has been declining since late June and is now back to levels not seen since March.

The latest modification was particularly notable, removing 5% of the total difficulty and heralding change in miner activity. This was the largest single drop since May 2021, and it is currently expected to cut the next difficulty, due in ten days, another 2%.

Arguably the most important aspect of the Bitcoin network itself, the difficulty adjustments also set the scene for redemption by leveling the playing field for miners. The lower the difficulty, the “easier” – or less energy-intensive – mining BTC since there is generally less competition.

Meanwhile, the data shows that the need to stay afloat remains a concern. According to CryptoQuant, miners sent 909 BTC to exchanges on July 24 alone, the most in a single day since June 22 and a 5% difficulty drop.

Thus, the turnaround for miners remains out of sight this week.

An overview of the basics of the Bitcoin network (screenshot). Source: BTC.com

As Cointelegraph further reports, it is not just the price of BTC that is giving miners a tough time given the current circumstances.

Congratulations for your MVRV-Z score

One of the most important on-chain metrics in Bitcoin has just crossed what is arguably its most important level – zero.

On July 25, Bitcoin MVRV-Z points returned to negative territory after a brief week above, thus falling into the area normally designated for aggregate price bottoms.

MVRV-Z shows how BTC is overbought or oversold relative to “fair value” and is popular thanks to its uncanny ability to set price limits.

His return may signal a new period of price pressure, as the accuracy in catching bottoms has a two-week margin of error.

At the beginning of July, Cointelegraph reported MVRV-Z, this time giving a worst-case scenario of $15,600 for BTC/USD.

Sentiment has cooled from four-month highs

For the cryptocurrency market, last week may have been a brief period of illogical exuberance if the sentiment data is to be believed.

Related Topics: Top 5 Cryptocurrencies to Watch This Week: BTC, ETH, BCH, AXS, EOS

The latest numbers from the Crypto Fear & Greed Index show a steady decline from the most positive market sentiment since April.

As of July 25, the index stands at 30/100 – still touted as “fear” driving the mood overall but still five points above the “extreme fear” segment in which the market previously spent 73 record days.

However, it has fully regained sentiment since mid-June when Fear & Greed reached some of its lows recorded at just 6/100.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The opinions and opinions expressed here 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.