BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

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BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

Bitcoin has not died for the 500th time, but market fear could easily convince you otherwise as analysts predict a slow return to higher levels.

BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

Bitcoin (BTC) starts a new week with traders still digesting the impact of the last — a major price drop that at one point saw $41,900.

A modest recovery is now competing with some formidable resistance, the first of which is $50,000.

As a sense of déjà vu pervades markets, analysts are coming to terms with the fact that the end of Q4 2021 will likely not produce the blow-off top that they had anticipated.

There is also concern that another, deeper, BTC price floor may have to enter before a genuine recovery takes place.

What could happen in the last few weeks of the year? Cointelegraph takes a look at five factors on everyone’s radar for the coming week.

Ranging into “bullish” Q1 2022?

After nearing $50,000 earlier this weekend, BTC/USD is now back around $48,000 — still down 16% in a week.

Against all-time highs of $69,000, the maximum loss overnight on Friday is so far 39% — significant, yet by no means record-breaking in Bitcoin terms.

As price predictions dry up, attention is now focusing on a revival into 2022.

“For what it’s worth, my base case is that we consolidate/range till EOY, carve out a regime of mixed-negative funding rates/premium, before bullish Q1,” William Clemente forecast in a Twitter discussion.

BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

A focus on the sustainability of price recovery will be derivatives markets after their cascade of position liquidations.

Friday’s events managed to somewhat “reset” open interest on Bitcoin futures to levels last seen in September at similar price levels to the pit of the dip.

BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

Bitcoin futures open interest chart. Source: Coinglass

New CPI data, new inflation woes

Macro markets are already on a knife-edge, but this week may add some familiar fuel to the fire in the form of fresh consumer price index (CPI) data.

Due for November, United States CPI readings are tipped to outstrip even October’s shock 6.2% year-on-year reading.

Economists’ prognoses were noted by Lyn Alden, financial commentator and founder of Lyn Alden Investment Strategy. She added that housing, a lagging indicator not as present last month, would likely be a factor in the results.

Inflation already hit the headlines again last week after Jerome Powell, chair of the Federal Reserve, appeared to imply that “transitory” was no longer an apt description of it.

Bitcoin immediately reacted, and bulls will be keenly eyeing the new CPI data in the hope of a similar knee-jerk response to that from October.

The cryptocurrency, despite recent volatility, is argued to be the best possible workaround for purchasing power protection, not least as inflation is in fact much higher when assets not covered by CPI are factored in.

“Everyone has double-digit inflation if they measure it correctly and needs Bitcoin more than they realize,” MicroStrategy CEO Michael Saylor, a well-known CPI critic in Bitcoin circles, warned late last month.

Meanwhile, central bank money printing, notably by the Fed, recently attracted public criticism from the head of another sovereign state.

“Can you guys just stop printing more money? You’re just going to make things worse,” Nayib Bukele, president of El Salvador, responded to Powell’s “transitory” speech.

One key difference lies in market composition: 18 months ago, leveraged traders and their influence on the markets were a much smaller phenomenon.

“This Bitcoin dip was NOT driven by sentiment,” Danny Scott, CEO of exchange CoinCorner, said in a series of tweets Saturday.

Different estimates give different definitions of what was really the highest-ever Bitcoin hash rate tally.

According to the popular MiningPoolStats resource, the hash rate is at its highest-ever sustained levels.

BTC sentiment ‘comparable to a funeral’ — 5 things to watch in Bitcoin this week

Bitcoin hash rate chart. Source: MiningPoolStats

Blockchain.com’s seven-day average currently stands at 162 exahashes per second (EH/s) — meanwhile, 18 EH/s off the pre-China crackdown record in May.

Bitcoin 7-day average hash rate chart. Source: Blockchain.com

Regardless, the popular mantra remains that spot price action inevitably follows trends in hash rate.

Difficulty, which keeps Bitcoin in balance regardless of hash rate changes, is now set to increase by just under 1% in six days’ time. Previously, the metric was slated to decline for a second period running.

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