Bitcoin (BTC) begins a new week above $10,000 and teasing investors with more gains — will it last or is a correction already guaranteed?
Cryptox takes a look at the coming week and what it might have in store for the Bitcoin price — five factors that could take BTC/USD to the moon or back down to four figures.
Gold vs. Bitcoin: “Strong gains are inevitable”
While stocks futures were inching higher on Monday, the focus for macro was more on geopolitical tensions. The United States and China continued to ratchet up the hostile mood, while coronavirus woes likewise stayed in the headlines.
Both issues have had a conspicuous impact on demand for safe havens, and notably gold. As Cryptox reported, last week witnessed major appreciation in both gold and silver, while the weekend saw bullion hit record intraday highs.
In line with previous sentiment gauges, plenty of faith lies in Bitcoin following the precious metal’s lead.
Speaking to Bloomberg, one analyst predicted that gold’s run was far from over.
“Strong gains are inevitable as we enter a period much like the post-GFC environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system,” Gavin Wendt, senior resource analyst at Australia’s MineLife Pty said.
At the same time, Citigroup placed the odds of XAU/USD topping $2,000 by the end of 2020 at 30%.
“The U.S. dollar just hit an all-time record low. You now need over $1,920 to buy a single ounce of #gold,” gold bug Peter Schiff summarized.
“But this record won’t last long as the dollar’s decline is only just getting started. It’s about to plunge to new depths taking the American standard of living down with it.”
Bitcoin versus gold 3-month chart. Source: Skew
Exchanges inflows spike hard
Against a backdrop of a flight to havens, Bitcoin’s rise to $10,300 is hardly surprising. Weeks of price compression were long anticipated to resolve in a break up or down — analysts were just split over which direction the market would go.
The speed of the weekend’s breakout nonetheless was troubling for some. Specifically, trader behavior suggests that the mood is increasingly turning to short-term profit-taking.
“BTC price went up too fast. Seems like other whales think so too,” Ki Young Ju, founder of on-chain analytics resource CryptoQuant, summarized.
Ki uploaded a chart showing exchange inflows for the past three days, which revealed a noticeable spike in the number of coins moving to exchange wallets.
At the start of the surge, a lack of selling from long-term hodlers gave the impression that this time, $10,000 would not disappear in a sell-off as with the two previous spikes.
CryptoQuant’s data now suggests that the temptation for many is too high.
Bitcoin exchange inflows 3-day chart. Source: CryptoQuant
A $300 futures gap opens
A familiar force returning to Bitcoin this week concerns derivatives markets — a gap in CME Group’s Bitcoin futures market.
Underscoring the contrast to compression, the difference between Friday’s trading session end and Monday’s start is a matter of several hundred dollars — with approximately $9,650 and $9,900 as the corridor.
As Cryptox frequently reports, BTC/USD has a habit of “filling” gaps left in futures, often within a matter of days or even hours after they appear.
As such, attention was focusing on a potential dip to $9,600 from press-time levels of $10,250 to seal the gap. Orders were piling up below the bottom of the corridor on Monday, around the so-called point of control (POC) at $9,575, leading Cryptox Markets analyst Michaël van de Poppe to draw different conclusions about Bitcoin and the rest of the market.
“To be honest, I believe Ethereum is starting in a new cycle and Bitcoin is still stuck in its range,” he said in private comments.
“The only suspicion I have is that we’re going to have a drop to $9,400 and continue the range for a month.”
Ether went beyond expectations with its own gains over the weekend, firmly beating resistance at $285 and continuing to $330.
CME Bitcoin futures 1-week chart. Source: TradingView
Eyes on the Fed and U.S. stimulus
Returning to macro, U.S. stimulus measures were due to be unveiled on Monday, pumping further dollars into the economy.
At the same time, markets were listening out for fresh directives from the Federal Reserve, which analysts tip to keep interest rates at 0.25%.
Any effect that this decision has on stocks could well contribute to the Bitcoin trajectory, despite the weekend forming an exception to the correlation that BTC price has shown to stocks.
Bitcoin versus S&P 500 3-month chart. Source: Skew
“The reason COVID19 is fatal to the U.S. economy is that we borrowed so much money to artificially boost GDP and the stock market in the past,” Schiff continued, adding:
“So, we’re too broke to borrow more to fight Covid now and all we can do is print. The dollar will crash taking the economy down with it.”
Schiff, as ever, was less than optimistic about Bitcoin’s prospects, privileging gold as the main safe haven as the dollar falls.
Miner sentiment indicators stay calm
Unlike spot traders, Bitcoin miners seemed calm throughout the recent volatility. According to CryptoQuant, mining pool outflows did not spike as a result of price gains.
Previous events caused much more turbulence, notably May’s block subsidy halving, which cut miner rewards by 50% overnight.
Bitcoin mining pool outflows 1-year chart. Source: CryptoQuant
At the same time, network fundamentals remain intact, with hash rate and difficulty either at or circling all-time highs.
An automatic difficulty adjustment on Tuesday will bring the metric down by around 2.7% according to current estimates, with hash rate stable.
Difficulty is an imprecise yet useful gauge of miner sentiment, while hash rate forms a rough indication of how much computer power secures the Bitcoin blockchain.
