Bitcoin (BTC) starts a new week fresh from a new multi-week low amid a return of highly nervous sentiment.
After dipping below $21,000 over the weekend, the largest cryptocurrency is consolidating around 10% lower than a week ago, and the fear across crypto markets is clearly visible.
As some call for new lows and others warns of a difficult few months ahead, there is plenty for bulls to contend with on both long and short timeframes
The United States Federal Reserve’s annual Jackson Hole symposium is due this week, while September is already due to form something of a showdown when it comes to inflation and associated macro price triggers.
That could mean fresh volatility across risk assets both during and prior, something weary investors will no doubt not welcome after last week's escapades on BTC/USD.
At the same time, miners are giving strong signals that the worst is over, with the hash rate starting to rebound from a rare “capitulation” phase.
With that in mind, Cointelegraph takes a closer look at five market-moving topics pertinent to Bitcoin traders in the coming days and beyond.
All eyes on Jackson Hole
The United States Federal Reserve is once again in the driving seat this week when it comes to potential macro price triggers for risk assets.
Fresh from last week’s Federal Open Markets Committee (FOMC) meeting, Fed officials, together with banking figures from around the world, will meet for the annual Jackson Hole symposium on Aug. 25-27.
This year’s gathering comes at a critical time for markets in the U.S. and further afield. Inflation under the Fed’s jurisdiction appears to have begun cooling, while elsewhere, the opposite story remains true.
The latest U.S. inflation data is still weeks away, but that might not stop Fed Chair Jerome Powell from giving strong hints as to how the Fed will react, as well as positioning expectations regarding future economic policy.
With that in mind, volatility could easily pick up both before and during the event, making Jackson Hole a key item to watch on traders’ radar.
“They are so focused on doing this partly just because they screwed up last year with the whole ‘transitory’ thing, and they realize that the one thing they can do now is tighten policy, and that will slow inflation,” Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut, told Bloomberg.
With that, it remains to be seen whether the market will shift to favor another 75-basis-point funds rate hike in September or gravitate toward a lower 50-point raise.
In a preview of its Jackson Hole comments circulating online, Bank of America said that it would “continue to look for 50bp rate hikes in September and November, plus an additional 25bp rate hike in December.”
Rate hikes in themselves present headwinds for risk assets and, in turn, provide a challenge for Bitcoin and its bid to escape strong correlation to asset classes such as U.S. equities.
BTC in for “ugly” six months
Bitcoin managed to stave off major volatility over the weekend, but still saw a new low for August as low-volume weekend trading conditions accentuated market moves.
After the sudden drawdown on Aug. 19, BTC/USD spent subsequent days eking out a low in an overall consolidation pattern, this continuing at the time of writing.
The low came in the form of a trip to $20,770 on Bitstamp, with Bitcoin then adding $1,000 before returning to trade approximately in the middle of the two values.
The weekly close at $21,500 was troublesome, marking the lowest since the week of July 18 after last week’s candle cost bulls almost $3,000 or 11.6%.
With fear of a new low palpable among commentators, others argued that conditions were not unequivocally pointing to further misery.
For Cointelegraph contributor Michaël van de Poppe, BTC/USD may cap any dip at the CME futures close from Aug. 19, this lying at around $21,200. More difficult for the majority of the market, he implied, would be gains, given the overall bias for downside to enter.
“Probably around CME open, we'll be seeing markets drop to $21.2K as that's the close of Friday, and then everything is fine,” he told Twitter followers over the weekend:
“Still not inclined we'll be seeing new lows. The overall period of accumulation and heavy correction on Friday causes panic. Pain is on the upside.”
Zooming out, however, Brian Beamish, founder of education suite The Rational Trader, left social media with no illusions over how the rest of 2022 should shape up for Bitcoin.
“Next 12-19 wks are gonna be ugly,” part of a tweet read.
“Once done, the floor for this cycle ought to be in - then we shall start it all over again.”
Beamish drew on experience of two prior crypto bear markets, with a comparative price action chart suggesting that the real macro low was far from in for BTC/USD.
Equally confident in a recovery over a longer period, however, was analyst Matthew Hyland, who argued that traders should not lose faith.
“The Bitcoin structure over the coming weeks/months shouldn't scare you. Either a higher low, double bottom, or cycle low will be formed,” he summarized.
“The end is near.”
Hash ribbons show miners out of capitulation phase
One group of Bitcoin network participants for which an end to hard times seems demonstrably near is miners.
Despite the latest price drop, on-chain data now shows that Bitcoin miners en masse have exited a “capitulation” period lasting over two months.
The move has been long anticipated. Earlier in August, mining firm Blockware forecast the hash ribbons capitulation phase to end either this month or next.
The latest shift was noted by Charles Edwards, CEO of asset manager Capriole, who compared this year’s capitulation with others in Bitcoin’s history.
“The Bitcoin miner capitulation has officially ended today, making it the 3rd longest capitulation in history at 71 days,” he wrote in a Twitter thread:
“This capitulation zone was longer than 2021, and just two days shorter than 2018's where price touched $3.1K.”
A look at hash rate estimates from monitoring resource MiningPoolStats shows that an uptick above 200 exahashes per second (EH/s) likely began in recent days.
“Historically, Bitcoin’s miner capitulations have captured major price lows and been great buy-signals,” Edwards continued, echoing the classic Bitcoin market mantra, “price follows hash rate:”
“Miner capitulations that occur late cycle (at least 2 years after halving) and after cycle tops have been the most profitable long-term signals (eg. 2012, 2015, 2018).”
Exchange balances hit new 4-year lows
Price struggles on short timeframes have proven to be something of a non-issue for buyers this time around.
Behind the scenes, investors, instead of fleeing BTC exposure, have been piling into the market at a noticeable pace in recent days.
According to data from on-chain analytics platform CryptoQuant, from Aug. 18, available Bitcoin on 21 major exchanges dropped from 2,342,662 BTC to 2,309,727 BTC on Aug. 22.
In four days, exchange users thus removed over 30,000 BTC from their accounts.
Fellow data firm Glassnode, meanwhile, added that the current combined balance across the exchanges it monitors hit a fresh four-year low on Aug. 22.
For comparison, in August 2018, BTC/USD was climbing toward $7,000, but still several months out from its bear market bottom of $3,100.
Sentiment gauge drops 40% in a week
Compared to before the price drop, meanwhile, sentiment is not what it was on crypto.
Even as exchanges see an acceleration in BTC leaving their books, the overall picture is now firmly one of “fear” when it comes to Bitcoin and altcoin investors.
According to the Crypto Fear & Greed Index, which uses a basket of factors to give a normalized score for market sentiment, “extreme fear” is just a step away.
At 29/100, the Index is four points off a return to its extreme fear bracket, having hit 27/100 over the weekend.
The latter represents a drop of 40% in a single week — seven days prior, the Index was at 45/100, recording its most optimistic levels since April.
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