After an intense July where macro factors provided significant swings, BTC price action was able to provide a weekly and monthly candlestick in favor of the bulls.
The path to some form of recovery is still on, and at some points in recent weeks it has looked like Bitcoin will suffer further on the back of June’s 40% losses.
Now, however, there is already a sense of optimism among analysts, but one thing remains clear – this “bear market rally” does not mean the end of the tunnel yet.
As summer 2022 enters its final month, Cointelegraph takes a look at potential market triggers in bitcoin trading as it approaches its highest levels since mid-June.
Spot price snatches bearish market trendlines
Regarding Bitcoin’s performance in July, things could have been a lot worse.
After June saw losses of nearly 40%, the BTC/USD pair managed to close out last month with a respectable 16.8% gain, according to data from analytics source Coinglass.
While those gains at one point exceeded 20%, July’s tally remains Bitcoin’s best since October 2021 – before hitting an all-time high of $69,000.
With solid foundations in place, the question among analysts now is whether the party can last, and for how long.
When D, W, and M closed, BTC closed D in the red. W&M closed in green and Trend Precognition launched a new buy trade on M. It is temporary until the candle closes, but the fact that it closed above the 50 month EMA makes it interesting. time to chill. Back to the charts in the morning. pic.twitter.com/ImWjNcXx91
– Material Indicators (MI_Algos) August 1, 2022
“First monthly close in green since March,” famous trader and analyst Josh Rager replied:
“After a monthly close above the all-time high of 2017 from the previous cycle, the price is slowly rising. It looks good so far, and even if this is a ‘bear market’ I am happy to buy the dips now.”
Others were more cautious, including Crypto trader and analyst Tony, who noted that the recent local rallies above $24,000 were still undisputed resistance on the day.
“I am looking for this bitcoin pattern breakdown and stay short while we are below the $24,000 supply zone that we rejected,” confirmed For Twitter followers.
However, the weekly and monthly closings have closed some important support levels for bitcoin. Specifically, the 200-week moving average turned against resistance on the weekly chart, and BTC/USD held its realized price, as data from Cointelegraph Markets Pro and TradingView show.
In its latest weekly newsletter released last week, infrastructure and crypto-mining firm Blockware also indicated that a recovery of the 180-period exponential movement average (EHMA) at just under $22,000 on its monthly chart would be “extremely bullish.”
“It also appears monthly that the 180-week EHMA is recovering, which is the level we’ve been talking about over the past few months as a significant accumulation area for Bitcoin. That closes Sunday night ET as well,” wrote lead insights analyst William Clementi:
“If it recovers, it will be quite bullish as the failed breakouts/breakouts are a strong signal.”
Macros are playing great for August
The overall picture starting in August is one of relief mixed with a sense of mistrust about how the rest of the year might unfold.
In short time frames, US stocks escaped the volatility created by the Federal Reserve last month to end July at the highest level. As Cointelegraph previously reported, calls for an extended rally in stocks are on the rise, something that could only be good news for the highly correlated crypto markets.
At the same time, analyzing the state of commodities, the popular Game of Trades Twitter account predicted that oil would soon lose steam and that this would have a clear impact on inflation in the United States.
Currently at its highest levels in more than forty years, the Consumer Price Index (CPI) is responsible for the Fed rate hikes that are putting pressure on risky assets across the board. A shift in inflation and thus Fed policy could quickly turn the tables.
One post from the weekend: “Big sellers stepped in to buy oil on Friday” read:
“Oil looks set for a crash, taking the CPI with it.”
Brent crude price drops as West eases efforts to restrain Russia #oil trading with /#inflation Energy risks are increasing. A plan to close Moscow from the marine insurance market has been delayed. https://t.co/fwQPGft0Uc pic.twitter.com/44Lne5P7qT
– Holger Zschaepitz (Schuldensuehner) August 1, 2022
However, the global picture when it comes to commodities is not so simple, with macro analyst Alex Krueger in turn warning that the energy crisis in Europe is not yet visible in market prices.
For bitcoin, the current recovery is more of a “bear market rally” than a true return of strength.
“Yes, this is a bear market rally… for now,” Krueger Wrote:
“The thing is that if inflation drops fast enough, which is possible, and the energy crisis in Europe is not exacerbated by a harsh winter, which is also possible, this could end up being the start of a bull market. Nobody knows yet.”
Krueger added that the status quo should remain until “at least until the end of August” when new Fed events affect the market.
In terms of significance, it included the September key rate decision, September CPI, the Fed’s Jackson Hole August 25 summit, and the August 10 CPI number for July.
The most important upcoming events, in order:
#1 September 22: Federal Open Market Committee
#2 September 13: CPI
#3 August 25: Jackson Hole
#4 August 10: CPI
Expect the markets to get rid of the risk (heavy selling) in the days leading up to each event if the market is on fire.
Then of course we have the infamous ETH merger around September 19th.
– Alex Kruger (@krugermacro) 30 July 2022
Turning to the strength of the US dollar, the US Dollar Index (DXY) remains at its lowest levels in nearly a month on the day, currently below 106.
For Game of Trades, the indicator was more important than the numbers. After its parabolic uptrend, a clear change of direction has now appeared on DXY’s daily chart.
“DXY broke its parabola. There is only one way a broken parabola ends up” hung.
The RSI raises questions about the bottom of the price
Turning to the on-chain signals, a bounce in one of Bitcoin’s core fundamentals wasn’t enough to convince analyst Venturefounder that BTC price bottoms exist.
zoom out To a multi-year view and comparison of BTC/USD across market cycles, the popular content creator argued that Bitcoin’s Relative Strength Index (DXY) remains subdued after its peak in April 2021.
The RSI measures how overbought or oversold BTC/USD is at a given price, and since May has seen its lowest readings ever.
Despite noting that Bitcoin is trading well below its fair value, the RSI has yet to regain the “bullish momentum” that marked the breakout of $20,000 and beyond at the end of 2020.
In April 2021, bitcoin hit $58,000 before halving at the end of July.
“The only way to see the July 2022 low as a cycle low is if you were to see the April 2021 high as the cycle high for this cycle,” Venturefounder stated:
“Bitcoin, Altcoins RSI and bullish momentum peaked in April 2021 and never recovered for the rest of this cycle. Do you think we have bottomed?”
Another obvious oversold period in the RSI came right after the COVID-19 crash in March 2020. This event Significantly affected the price strength with the entry into the latest halving support block.
Of course, BTC/USD never looked back, and it continued to recover its all-time high at that time about six months later.
The purpose of the ETF finally adds to its holdings
Things could be looking for institutional participation in Bitcoin as subtle signs of recovery appear in the stats.
The latest such signal comes from the world’s first exchange-traded spot Bitcoin ETF, the Purpose Bitcoin ETF.
After its holdings abruptly dropped by 50% in June, the producer is finally adding BTC again, indicating that demand is no longer declining.
Purpose added 2600 BTC, something that commentator Jan Wuestenfeld noted as well as ending several weeks of dormancy.
“Assets under management are still far from all-time highs,” . said added.
However, the trend of recovery is far from being ubiquitous. A look at the Grayscale Bitcoin Trust (GBTC) continues the alarming trend of lack of demand.
Data from Coinglass confirmed that the fund’s premium to the spot rate, which is actually a long discount, is now around record lows of about 35%.
Grayscale continues legal action against US regulators over their refusal to allow the launch of a Bitcoin ETF in the local market. GBTC will turn into an ETF when conditions permit.
New month, new fear
It’s been a fun ride, but the crypto market sentiment is already back in the “fear” zone.
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Recent readings of the Crypto Fear & Greed Index confirm that the “neutral” feeling can hardly last a day, and that despite the high prevailing prices, it is difficult to shake off cold feet.
The index measures 33/100 as of August 1, still high compared to recent months but already well below the 42/100 highs seen just days ago.
But for research firm Santiment, there is still cause for optimism. The company’s ownership metric that governs transaction volume relative to the network’s total value of bitcoin ended in July in its own “neutral” territory.
Thus, the Network Value to Transaction (NVT) token trading model came after printing bullish divergences in May and June, at the last monthly close.
“With a neutral signal now with prices rising and token trading down slightly, August can move in either direction,” Santment summed up in an update on Twitter about the latest figures.
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