Biggest mining difficulty drop of 2023? 5 things to know in Bitcoin this week
Bitcoin (BTC) enters the last full week of July on an uncertain footing as $30,000 becomes resistance.
In what promises to be an exciting — but perhaps nerve-racking — week for traders, BTC price action is staring down a combination of volatility triggers.
Chief among these is the United States Federal Reserve’s decision on interest rates, this headlining an important slew of macro data releases.
Some hope that these alone will be enough to shake Bitcoin out of its month-long trading range, in which it has barely moved from the $30,000 mark. The market has so far offered little by way of cues as to where it might head next.
That said, traders have become impatient, and increasingly believe that BTC/USD will ultimately break down from current levels to head toward $25,000 or even lower.
Cointelegaph takes a look at the main factors in the debate over BTC price performance as July comes to a close.
BTC price tags $29,000 in bearish start to week
Bitcoin delivered a classic volatility burst into the July 23 weekly close, giving bulls a glimpse of $30,000 support potentially returning.
This was short lived, however, and with hours still left to go until the weekly candle close, BTC/USD retraced its last-minute gains to end the week at almost exactly $30,000.
Overnight price action was weaker still, and at the time of writing, Bitcoin was headed toward $29,000, per data from Cointelegraph Markets Pro and TradingView.
Overall, however, the all-too-familiar range continues to endure.
As the weekend came to a close, Michaël van de Poppe, founder and CEO of trading firm Eight, highlighted what he called the “crucial area” for bulls to break through.
“The crucial level didn't break for Bitcoin, so we'll continue the sideways chop,” he continued on the day.
"The scenarios remain the same; - Longs above $30,200-30,400 - Longs when we get to $29,000."
BTC/USD annotated chart. Source: Michaël van de Poppe/TwitterPopular trader Daan Crypto Trades noted that the spike to $30,300 had effectively opened up and already closed a CME futures gap.
“Don’t fall for the weekend deviations,” he told Twitter followers.
BTC/USD annotated chart. Source: Daan Crypto Trades/TwitterA cautiously optimistic take on the past month’s range came from fellow trader Credible Crypto, who suggested that Bitcoin could avoid more significant losses.
“For the last 30 days price has been within a tight range and aggregate OI has oscillated between 2 key levels,” he summarized.
“Price ranges, OI builds, then we see a flush up/down which resets OI before the cycle repeats. If it continues, downside should be limited here at the lows.”
BTC/USD 1-hour chart. Source: TradingViewFed rate hike decision leads "action packed week"
One event dominates the macro landscape this week, and not only in crypto.
The Fed’s Federal Open Market Committee (FOMC) will meet on July 26 to decide how far — if at all — to raise benchmark interest rates.
Markets have little doubt that a hike is to come — unlike last month, language from Fed officials has led them to practically unanimously predict a 0.25% increase.
According to the latest data from CME Group’s FedWatch Tool, the odds of that occurring currently stand at 99.8%.
Fed target rate probabilities chart. Source: CME GroupThe week’s macro data releases will only come after FOMC, leaving no room for these to sway a decision in time. The releases are no less important, however, and include Q2 GDP, as well as the Personal Consumption Expenditures (PCE) Index print.
“Nothing like an action packed week in the markets. 20% of S&P 500 companies reporting earnings along with a Fed meeting and inflation data to top it off,” financial commentary resource The Kobeissi Letter wrote in part of a Twitter summary.
“After a couple weeks of low volatility, things should get interesting this week. It’s a great week to be a trader.”Key Events This Week:
1. Consumer Confidence data - Tuesday
2. New Home Sales data - Wednesday
3. Fed Interest Rate Decision - Wednesday
4. Q2 2023 GDP data - Thursday
5. PCE Inflation data - Friday
6. ~20% of S&P 500 companies report earnings
Action packed week ahead.
— The Kobeissi Letter (@KobeissiLetter) July 23, 2023Fellow financial commentator Tedtalksmacro noted that overall global central bank liquidity conditions, despite the potential incoming hike, appeared to be at macro lows.
“After free falling since March, global CB liquidity could have found a bottom here,” he commented alongside comparative charts.
“Historically that's been good for BTC + risk.”
Global central bank liquidity vs. BTC/USD chart. Source: Tedtalksmacro/TwitterFundamentals due a dip in Hash Ribbons "capitulation"
Bitcoin’s stubborn trading range is taking its toll once again on network fundamentals, as fervent competition among miners cools.
According to the latest estimates from BTC.com, Bitcoin’s mining difficulty will decrease by around 4% at its next automated readjustment on July 26.
Currently at all-time highs, difficulty has seen only a handful of drops this year, and this week’s could be the largest of 2023 so far.
Bitcoin network fundamentals overview (screenshot). Source: BTC.comHash rate tells a similar story of consolidation after hitting its own all-time highs this month. Analyzing the Hash Ribbons metric, Charles Edwards, founder of crypto asset manager Capriole Investments, flagged a new “capitulation” phase.
While absent from the market since late 2022, when Bitcoin was still suffering the consequences of the FTX meltdown, a capitulation is nothing for traders to fear, Edwards argued.
Despite this, he called the explosive growth in hash rate of the past seven months “unsustainable.”
“We have a Hash Ribbon capitulation. AKA a slowing in Bitcoin's Hash Rate growth after what has been an incredible (unsustainable) 50% increase in 2023,” he commented last week.
“HR capitulation is not a sell signal, but it's also not bullish. Risk management warranted until growth resumes.”
Bitcoin Hash Ribbons chart. Source: Charles Edwards/TwitterCointelegraph continues to cover extensively the status quo among miners, with various theories emerging over recent BTC selling behavior.
NVT taps highest since 2019
As Bitcoin mines its 800,000th block, a classic on-chain metric is delivering a similar signal that — at least for the time being — BTC price conditions may be overheated.
The Network Value to Transaction (NVT) Ratio, which divides the Bitcoin market cap by the U.S. dollar value of daily on-chain transactions, has hit four-year highs.
NVT seeks to give an indication of when on-chain volume is out of sync with overall network value, but its implications can vary.
As explained by its creator, analyst Willy Woo, NVT spikes can occur in both bull markets and periods of “unsustainable” price growth.
“When Bitcoin`s NVT is high, it indicates that its network valuation is outstripping the value being transmitted on its payment network, this can happen when the network is in high growth and investors are valuing it as a high return investment, or alternatively when the price is in an unsustainable bubble,” he wrote in an accompanying introduction to the metric on his analytics site, Woobull.
Bitcoin NVT Ratio chart (screenshot). Source: WoobullIn his latest interview with Cointelegraph, meanwhile, Capriole’s Edwards argued that NVT was still in check versus extreme highs, such as those seen during 2021.
“NVT is currently trading at a normal level,” he said, adding that “given its normalized reading today, it doesn't tell us much; just that Bitcoin is fairly valued according to this metric alone.”
Long-term holders control 75% of BTC supply
A silver lining in the making? Bitcoin’s available supply continues to shrink behind the scenes.
Related: Bitcoin can still hit $19K, warns trader ahead of BTC price ‘big move’
As noted by various market participants, the amount of BTC on offer for purchase shows enduring conviction among its most ardent hodlers.
55% of the supply has now remained dormant for at least two years, and 29% for five years or more, data from on-chain analytics firm Glassnode states.
“The Bitcoin Long-Term Holder Supply has reached a new ATH of 14.52M BTC, equivalent to 75% of the circulating supply,” additional analysis highlighted this week.
“This suggests HODLing is the preferred market dynamic amongst mature investors.”An accompanying chart showed the amount of BTC in the hands of so-called long-term holders, or LTHs, defined as entities hodling coins for 155 days or more.
Bitcoin Long-Term Hodler Supply annotated chart. Source: Glassnode/TwitterMagazine: Tokenizing music royalties as NFTs could help the next Taylor Swift
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.