- As crypto bank Celsius files for bankruptcy, bitcoin is stuck in a sideways move.
- Investors are trying to decide whether the bad news is all priced in, or if another plunge is coming.
- Analysts at Kraken have pointed to a key chart for understanding where the price is going.
Bitcoin needs to make its mind up. It has been hovering around $20,000 since early June, with brief dips under and climbs above.
The price action for bitcoin and much of the wider crypto market reflects indecision among investors over whether all the bad news has been priced in, or not.
There has certainly been plenty of bad news. A extremely poor macro environment for all risk assets, with inflation hot and the Fed hiking aggressively, has been compounded by the crypto-specific meltdown of blockchain Terra Luna, "crypto bank" Celsius going bankrupt and hedge fund Three Arrows Capital going under with huge bad debts.
We have seen a 75% fall in bitcoin's price from its peak, and much of the wider market is down 90% from all-time highs. It looks a lot like a bottom forming, but uncertainty remains.
The price has become highly correlated with the stock market and interest rate expectations, performing like a high risk speculative tech stock, rather than a commodity or currency.
While this is clearly a bad thing when the macro environment is negative for stocks, conversely it could mean that inflation peaking and starting to fall could be very positive for crypto.
That point may be close, with this week's consumer inflation print of 9.1% in June being seen as the likely peak, with next month's reading expected to be lower.
As ever with crypto, there could be wildcards appearing at anytime though. One example of this is the expectation the trustees of collapsed crypto exchange Mt Gox will dump around $3 billion of bitcoin on the market in the coming weeks as they work through the legal process of returning money to creditors.
Some see that as the trigger for another leg downward in price, but given it is widely known about it could easily fall into the priced-in-already category.
Nick Heale, head of corporate advisory at digital asset broker GlobalBlock, said it is it notable that bitcoin has held strong in the $20k region despite all the negative news flow.
"The strength of the US dollar indicated by DXY, which measures the strength of the US dollar relative to six other foreign currencies, is at a 20-year high. The US dollar is currently at parity with the euro, indicating the degree of fear in the financial markets generally, as traders are fleeing to the US dollar haven."
"It is indeed surprising that bitcoin has remained range bound for such a long period, considering the geopolitical and macro-economic factors at large. In China, we have heard reports of bank runs due to depositor's accounts being frozen, a default of Sri Lanka, not to mention the ongoing war in Ukraine and escalation of COVID measures in China which will continue to impact the supply chain."
"Considering this, it is understandable that bitcoin remains technically oversold, despite the fundamentals for a decentralized asset remaining intact," he added.
Yuya Hasegawa, crypto market analyst at Bitbank, noted the same macro picture is driving bitcoin as the stock market. Improvement on this front will be the trigger for bitcoin to move higher once again.
"Bitcoin started the week lower as risk sentiment worsened before Wednesday's US CPI announcement. The market was given a little bit of hope last week as Fed's Waller said that a 50bp rate hike at September's FOMC meeting is a possibility. However, now the market is paying ever closer attention to U.S. inflation data and last week's jobs report did not do much to improve the situation."
Hasegawa added that bitcoin's upside will likely be limited until better inflation numbers emerge and its 200-week moving average, which is currently at around $22.6k, seems to be offering "strong resistance" for price upside.
According to analysts at Kraken Intelligence however, bitcoin has already reached an extreme low in terms of the 200-week moving average multiple chart, suggesting a bottom is in, or at least near. It is certainly a chart to pay close attention to.
Being at a 1 times multiple has in the past been a launchpad for big upward moves, as the chart here shows.
Should bullish sentiment return and bitcoin once again hits 10 to 15 times the 200 week moving average, that would imply a new peak of price of between $214,987 and $322,481, Kraken said.
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