Bitcoin (BTC) starts a new week below $20,000. After a very similar weekly close, BTC/USD still awaits a breakout of several weeks’ trading range. The move has been around for a long time, but until now the market lacked the catalyst to make it happen. Support and resistance zones remained unopposed. So, what should you consider when creating your trading strategy this week? Here are the developments to watch out for this week…
Will the market volatility end?
The weekly candle close just above $19,400 did not come as a surprise, despite Bitcoin hitting its highest level since mid-September. On one-week timeframes, BTC/USD thus continued to form a cluster of candles where the market barely moved up or down. According to experts, this is a classic sign that volatility is coming to an end.
This exit event was already forecast on shorter timeframes, these came on Friday as US jobs data led to a short sell-off. This cost the bulls $20,000. Now, analysts are looking for repeated performance in more significant periods.
Trader and entrepreneur Jordan Lindsey referred to the narrowing of Bitcoin’s trading range as trading volume increases. This thesis is currently supported by the Bitcoin historical volatility index (BVOL), which is a specialized indicator for tracking volatility in its historical context. Currently, BVOL is at lows that have only been seen a few times since Bitcoin’s existence.
William Clemente, co-founder of crypto-asset research and trading firm Reflexivity Research, described the BVOL data as “significant.” The other account Livecoin noted, however, that BTC/USD has a habit of consolidating longer than the market would like when volatility is very low.
September’s CPI data will mark the intense macro week
Turning to the broader economy, there are more than enough potential BTC price triggers in the making this week. From October 12, economic data will be released intensely and quickly, and shocks to commodity markets remain a globe of curves as tensions reach new heights in the Russia-Ukraine war. “Next week will be fun: PPI, FOMC minutes, CPI, Initial jobless claims and retail sales,” crypto expert William Clemente summed up.
He added that of particular interest is the September US Consumer Price Index (CPI) data on October 13, which will set an important reference point for the FED as it approaches a new rate hike next month. While the direction of CPI inflation based on previous data is probably less mysterious, each data tends to produce unusual market volatility, both up and down. If this month repeats the trend, both long and short speculative trades could be liquidated in bulk. Meanwhile, apart from the USA, Europe is also on the agenda with the events that have reached a new dimension in the Russia-Ukraine war in recent days.
Difficulty will see biggest rise since August 2021
Internal developments in Bitcoin could lay the foundation for confidence boost as the week begins. According to current estimates, Bitcoin’s mining difficulty will experience a massive 13 percent increase on October 10. The numbers provide surprising data. Such an increase indicates that miner competition is increasing in line with increasing network participation. However, BTC price action is still near two-year lows. Miners will already have extremely low profit margins, and many will likely have production costs very close to their current spot price.
Increased difficulty, and hence financial commitments, should therefore further tighten profitability, increasing the risk of miner capitulations. “Bitcoin miners are not going to stop,” analyst Dylan LeClair wrote about the difficulty forecast last week. Forecasting where miners might start to run into trouble, ten chain analytics firm Glassnode drew attention to the roughly $18,000 space thanks to their latest modeling techniques.
Is it time to bottom in BTC price?
Charles Edwards, CEO of asset manager Capriole, looked at past cycles, considering when BTC/USD could bottom out in this bear market. In addition to Clemente this weekend, Edwards noted that in both 2018 and 2014, Bitcoin recorded a macro bottom within a certain period of time following the previous all-time high. Referring to Clemente’s chart comparing the distances between Bitcoin all-time highs and subsequent macro lows, he confirmed, “We are in the 90-day window where the last 2 Bitcoin cycles have bottomed out.”
Sensitivity data replicates past times
According to the popular market indicator, the Crypto Fear and Greed Index, “extreme fear” still reigns supreme in crypto, as it has for most of 2022. With a score of 22/100, Fear & Greed has been in its lowest zone for several weeks. Earlier in the year, it saw the longest line of “extreme greed” ever, over two months.
Macroeconomic data to follow
In addition to the factors above, as we have announced as Kriptokoin.com, today, Chicago FED President’s speech will take place at 16 pm. Apart from that, the first session of the IMF’s meeting will take place at 18 CEST. On October 13, US CPI data will be announced at 15.30 CEST. FOMC minutes will be released on October 13, 21 CET. On the same day, European Central Bank President Lagarde’s speech will also take place.
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