Bitcoin (BTC) starts the second week of April with a whimper as bulls struggle to hold support above $40,000.
After a weekend of refreshingly low volatility, jitters returned to markets at the recent weekly close and, in classic style, BTC/USD fell in the final hours of April 10th.
The average hodler currently feels caught between two chairs – macro forces promise big trend shifts but are slow to unfold. At the same time, there is also a general lack of “serious” buyer demand for crypto assets.
However, insiders are showing no doubt about the future, as evidenced by Bitcoin network fundamentals at all-time highs and more.
The combination of these opposing factors is price action that just doesn’t seem to know where to go next. Can anything change in the coming week?
Cointelegraph takes a look at five potential Bitcoin price clues as a $40,000 retest draws closer.
No “massive drawdown” for BTC?
April 11 begins with a $42,000 reclaim for BTC/USD, which the pair briefly lost overnight as it dipped into the weekly close.
Bitcoin hit its lowest level in weeks at $41,771 on Bitstamp, matching where it was on March 23.
BTC/USD 1 Hour Candlestick Chart (Bitstamp). Source: TradingView
In the process, the largest cryptocurrency gave up all of its gains in the meantime to fall back to the top of its trading range from last month. However, this could result in a retest of former resistance as support. Rather than fearing the worst, many traders hoped that a reversal would happen soon.
“Bullish retest of flipped weekly level, Finex whale filling bids, I buy the dip. If you want to wait for confirmation, you can wait for a monthly close to confirm,” popular Twitter user Credible Crypto wrote as part of comments overnight.
Credible Crypto commented on both Bitfinex’s walk buy and new chart data showing that Bitcoin’s Aroon indicator has turned bullish over the past few days.
Designed to identify uptrends or downtrends in an asset, Aroon has only provided such bearish-to-bullish “crosses” six times since 2017 – the time of Bitcoin’s previous blow-off top.
Pretty good chance you’re asking me. Aroon is designed to act as both a smooth and exponential indicator due to its behavior over time instead of price.
I don’t expect a massive drawdown.
– Otsu (@OtsukimiCrypto) April 11, 2022
As Cointelegraph recently reported, trader and analyst Rekt Capital also had plenty of reasons to be bullish on Bitcoin. But at around $42,150, the weekly close ended up disappointing compared to its $43,100 challenge.
“A BTC weekly candle close like this and retesting ~$43,100 as new support would be successful,” he explained next to a chart on April 10th.
“Therefore, BTC would be positioned for a move higher within the ~43,100 – $52,000 range as shown in the previous blue circle.”
So did Cointelegraph contributor Michaël van de Poppe written down that the April 10 late dip had closed the potential for a CME Group futures gap to provide a short-term price target at the April 11 open of trading.
Equities were under pressure across the board
It’s a bleak day for equities so far as Asia leads with widespread losses, in no small part due to China’s recent COVID-19 lockdowns.
Both the Shanghai Composite Index and Hong Kong’s Hang Seng fell over 2% in morning trade.
In Europe, markets were not yet open at the time of writing, but ongoing geopolitical tensions, centered on Russia, showed no signs of changing.
A glimmer of hope for the euro has come from a possible lead of incumbent French President Emmanuel Macron over rival Marine Le Pen in polls.
Looking beyond the short term, however, analysts are observing worrying trends: soaring inflation, losses in bond markets and a seeming inability for central banks to react yet.
The European Central Bank (ECB) will meet this week with a focus on controlling inflation – ending asset purchases and raising interest rates.
The biggest bond bubble in 800 years will continue to be deflated ahead of next week after the start of the Fed’s rate-hiking cycle #ECB meet & as ascending #Inflation rocked Bond mkts. The value of global bonds fell another $960 billion this week, bringing ATH’s total loss to $6 trillion. pic.twitter.com/g78Pu2dyLo
— Holger Zschaepitz (@Schuldensuehner) April 10, 2022
The situation underscores the difficulties equities and risk assets face in the current climate. With commentators unanimous that the inflationary environment and associated central bank actions will reduce demand for bitcoin and crypto, the true extent of the economic reality is already clear.
In an earlier Twitter post last week, Holger Zschaepitz uncovered that despite all the gains in the S&P 500, for example, the Fed’s asset purchases mean that progress since the global financial crisis has actually stalled.
“Just for context, the S&P 500 may have hit a new ATH today, but when you put the index in relation to the Fed’s balance sheet, it’s trading at the same level it was in 2008, so stocks have traded sideways since 2008, which is essentially the balance sheet expansion,” he wrote.
down together?
For Arthur Hayes, ex-CEO of derivatives giant BitMEX, the bullish case for Bitcoin as a store of value is still there given the failure of fiat.
The problem is that such a scenario is not a reality – yet.
In his most recent blog post, published on April 11, Hayes repeatedly warned that for the average investor with significant exposure to risky assets, the pain would precede the gain.
The future may well see a shift from US dollar hegemony to other assets by nation states and individuals alike, but in the meantime, macro forces will continue to take their toll on crypto.
If stocks are to plummet as central banks act to fight inflation, crypto’s increasing correlation with them means only one thing.
“The short term (10 day) correlation is high and the medium term (30 day and 90 day) correlations are moving up and to the right. We don’t want that,” Hayes argued about crypto correlations with the Nasdaq 100 (NDX).
“For me to fly the flag to support selling fiat and buying crypto ahead of an NDX meltdown (30% to 50% drawdown), correlations need to be demonstratively trending down across all timeframes.”
Could stocks really lose half their value from the Fed and its actions? “One can only guess,” Hayes replied.
“30% less? […] 50% down? […] Your guess is as good as mine,” he added.
“But let’s be clear — the Fed has no plans to expand its balance sheet again any time soon, which means stocks won’t continue to rise.”
April 4 balance sheet of the Federal Reserve (screenshot). Source: Federal Reserve
The mood deviates from the traditional markets
With macro gloominess on the horizon, it’s no surprise that market sentiment has taken a hit.
After feeling “greed” in crypto in late March, the Crypto Fear & Greed Index is now firmly back in “fear” territory.
An analogue of the traditional market’s Fear & Greed Index, the metric has lost half of its normalized score in less than two weeks as traders get cold feet again.
On April 11, Crypto Fear & Greed measured 32/100 while its traditional market counterpart was higher at 46/100, defined as “neutral”.
Deserved or not, Van de Poppe, meanwhile, reminded readers not to act on sentiment signals.
“Everyone has been super bullish on the markets but now the markets are starting to correct and fear is taking over,” he said summarized.
“Sentiment is not a good indicator of how you should normally trade.”
Crypto Fear & Greed Index (Screenshot). Source: Alternative.me
Basics keep the faith
A glimmer of hope comes from a familiar source this week. Despite all the price drops, Bitcoin’s network difficulty is expected to drop by just 0.4% over the next few days.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, NEAR, FTT, ETC, XMR
Arguably the most important aspect of the Bitcoin network’s self-sustaining paradigm, difficulty, will adjust downward from all-time highs to reflect changes in mining composition.
The small size of the adjustment suggests miners remain financially buoyant at current levels and are not struggling despite BTC/USD’s 10% plunge over the past week.
Bitcoin difficulty 7-day moving average chart. Source: Blockchain
More data supports the argument, with hash rate estimates from monitoring resource MiningPoolStats also lingering at record highs.
As Cointelegraph recently reported, mining continues to attract large investments, including from Blockstream, which last week announced a solar-powered farm that will generate 30 petahashes per second of hash rate once operational.
Chart of estimated bitcoin hashrate (screenshot). Source: MiningPoolStats
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.