The co-founders of the crypto analytics firm Glassnode believe that the US Dollar Index (DXY) will soon dip and spark a massive Bitcoin (BTC) bull run. Glassnode co-founders Jan Happel and Yann Allemann, who share the Negentropic handle on the social media platform X, say the DXY appears to have peaked. The DXY is a […]
The post Bitcoin About To Hit New Highs As ‘Completely New Environment Unfolds’ for BTC, Says Glassnode Co-Founders appeared first on The Daily Hodl.
Bitcoin is still down 60% from its November 2021 all-time high, so many traders wonder if the BTC price could crash further in the coming months.
Bitcoin (BTC) is still in a bullish reversal when looking at this year’s price chart. The BTC price has gained 70% after bottoming out at around $16,800 in November 2022, defying rate hike fears while riding on growing exchange-traded fund approval optimism.
However, in recent months, Bitcoin bulls have failed to sustain the BTC price above $30,000. Therefore, with the “bullish” halving still over 200 days away, many traders wonder if the Bitcoin price will crash again in the coming months.
Cointelegraph looks at the possible scenarios as Q3 draws to a close.
From a technical standpoint, the Bitcoin price has stabilized around the 0.236 Fib line of its Fibonacci retracement graph drawn from the $69,000 swing high (the market top) to the $15,900 swing low (the local market bottom).
This flat BTC price action looks very similar to the one witnessed during the 2018 BTC price correction.
In 2018, the BTC/USD pair stabilized around its 0.236 Fib line at around $6,790 for months before dropping toward $3,000 in December. The $3,000 level coincided with what is now multiyear ascending trendline support (marked as bear market support in the chart above).
Bitcoin is now halfway repeating 2018 already with price flatlining at the 0.236 Fib line. A breakdown from this level meaning BTC price will see $21,500 as the next major support level, down 17.75% from current levels.
Meanwhile, the U.S. dollar strength index (DXY), which measures the greenback's strength against a pool of top foreign currencies, has reached its highest level since November 2022.
The index has been negatively correlated with Bitcoin throughout 2023, as shown below.
The dollar's advance has accelerated after the Federal Reserve's rate decision last week, and the DXY is currently painting its 11th consecutive green weekly candle.
In other words, Bitcoin's upside prospects could be limited if the dollar continues to climb following the DXY golden cross.
Bitcoin's on-chain metrics are painting a mixed outlook.
Bitcoin's Coin Day Destroyed (CDD) metric, measuring long-term investors' actions, spiked on Sep. 19, indicating that some long-term BTC holders moved their coins, suggesting possible profit-taking or repositioning.
Traders should take caution here as most CDD spikes have historically preceded price declines.
On the other hand, Bitcoin reserves across all crypto exchanges continue declining, which hints at increasing hodling behavior among investors.
Bitcoin analysts are also divided over where BTC price may be headed in the months ahead.
For instance, popular trader Skew argues that the BTC price can hit $30,000 by October, citing a thin Ask liquidity near $27,000, possibly leading to a breakout.
Related: Bitcoin fails to recoup post-Fed losses as $20K BTC price returns to radar
Fellow analyst Rekt Capital, however, doesn't rule out a price correction toward $18,000 based on a pre-halving fractal shown below.
"History suggests that the next 140 days will be crucial for dollar-cost-averaging in preparation for the Post-Halving parabolic rally," said Rekt Capital, adding:
"If Bitcoin is going to retrace from [the current price levels], it will most likely be during this current 140 day period."
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
Bitcoin trading volumes at a five-year low and the S&P 500 reaching its lowest levels in over three months could spell trouble for BTC bulls.
The upcoming $3 billion in Bitcoin (BTC) monthly options expiration on Sept. 29 could prove pivotal for the $26,000 support level.
On one side, Bitcoin’s recognition in China appears to be strengthening, following a judicial report from a Shanghai Court that acknowledged digital currencies as unique and non-replicable.
Conversely, Bitcoin’s spot exchange trading volumes have dwindled to a five-year low, according to on-chain analytics firm CryptoQuant. Analyst Cauê Oliveira pointed out that a significant factor behind this decline in trading activity is the growing fear surrounding the macroeconomic outlook.
Despite the increase in long-term holders, the reduced trading volume poses a risk in terms of unexpected volatility. This means that price swings resulting from liquidations in derivative contracts could potentially cause structural market damage if there aren’t enough active participants.
Furthermore, there is growing unease among traditional financial institutions when it comes to handling crypto-related payments.
JPMorgan Chase, the largest bank in North America, is reportedly prohibiting transfers “related to crypto assets” within its retail division, Chase. The stated rationale is to protect against potential involvement in fraudulent or scam activities.
Lastly, Bitcoin holders are feeling apprehensive as the Dollar Strength Index (DXY), a measure of the dollar’s strength against other currencies, reached 106 on Sept. 26, its highest level in 10 months.
Historically, this index exhibits an inverse correlation with risk-on assets, tending to rise when investors seek safety in cash positions.
The open interest for the Sep. 29 options expiration currently stands at $3 billion. However, it is expected that the final amount will be lower due to bullish expectations of Bitcoin’s price reaching $27,000 or higher.
The unsuccessful attempt to break above $27,200 on Sept. 19 may have contributed to overconfidence among Bitcoin investors.
The 0.58 put-to-call ratio reflects the imbalance between the $1.9 billion in call (buy) open interest and the $1.1 billion in put (sell) options.
However, if Bitcoin’s price remains near $26,300 at 8:00 am UTC on Aug. 25, only $120 million worth of the call (buy) options will be available. This difference happens because the right to buy Bitcoin at $27,000 or $28,000 is useless if BTC’s price is below this level on expiry.
Below are the four likeliest scenarios based on the current price action. The number of options contracts available on Sept. 29 for call (buy) and put (sell) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit.
This crude estimate disregards more complex investment strategies. For instance, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.
It’s worth noting that for the bulls to level the playing field ahead of the monthly expiration, they need to achieve a 3.2% price increase from $26,200. In contrast, the bears only need a modest 1% correction below $26,000 to gain a $430-million advantage on Sept. 29.
Related: Crypto bills could be delayed as many prepare for US gov’t shutdown
Given that Bitcoin traded below the $26,000 support level between Sept. 1 and Sept. 11, it wouldn’t be surprising if this level were breached again as the options expiration approaches. Moreover, investor sentiment is becoming increasingly risk-averse, as evidenced by the S&P 500 dropping to its lowest level since June.
Consequently, unless there is significant news or an event that strongly favors Bitcoin bulls, the likelihood of BTC’s price breaking below $26,000 by Sept. 29 remains high.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Concerns over the U.S. dollar’s impact on Bitcoin may be overstated by investors, particularly in the longer term.
The Dollar Strength Index (DXY) achieved its highest level in nearly 10 months on Sept. 22, indicating growing confidence in the United States dollar compared to other fiat currencies like the British pound, euro, Japanese yen and Swiss franc.
Moreover, investors are concerned that this surge in demand for the U.S. dollar might pose challenges for Bitcoin (BTC) and cryptocurrencies, although these concerns are not necessarily interconnected.
The DXY confirmed a golden cross pattern when the 50-day moving average surpassed the longer 200-day moving average, a signal often seen as a precursor to a bull market by technical analysts.
Despite some investors believing that historical trends are determined solely by price patterns, it’s important to note that in September, the U.S. dollar exhibited strength, even in the face of concerns about inflation and economic growth in the world’s largest economy.
Market expectations for U.S. gross domestic product growth in 2024 hover at 1.3%, which is lower than the 2.4% average rate over the preceding four years. This slowdown is attributed to factors such as tighter monetary policy, rising interest rates and diminishing fiscal stimulus.
However, not every increase in the DXY reflects heightened confidence in the economic policies of the U.S. Federal Reserve. For example, if investors opt to sell U.S. Treasurys and hold onto cash, it suggests a looming recession or a significant uptick in inflation as the most likely scenarios.
When the current inflation rate is 3.7% and on an upward trajectory, there’s little incentive to secure a 4.4% yield, prompting investors to demand a 4.62% annual return on five-year U.S. Treasurys as of Sept. 19, marking the highest level in 12 years.
This data unequivocally demonstrates that investors are avoiding government bonds in favor of the security of cash positions. This may seem counterintuitive initially, but it aligns with the strategy of waiting for a more favorable entry point.
Investors anticipate that the Fed will continue raising interest rates, allowing them to capture higher yields in the future.
If investors lack confidence in the Fed’s ability to curb inflation without causing significant economic harm, a direct link between a stronger DXY and reduced demand for Bitcoin may not exist. On one hand, there is indeed a decreased appetite for risk-on assets, evident from the S&P 500’s negative performance of 4.3% in September. However, investors recognize that hoarding cash, even in money market funds, does not ensure stable purchasing power.
As the government continues to raise the debt ceiling, investors face dilution, rendering nominal returns less significant due to the increased money supply. This explains why scarce assets, such as Bitcoin, and some leading tech companies may perform well even during an economic slowdown.
Related: How much is Bitcoin worth today?
If the S&P 500 continues its downtrend, then investors might exit risk markets regardless of their scarcity or growth potential, at least initially. In such an environment, Bitcoin could indeed face negative performance.
However, it’s important to note that this analysis overlooks the fact that the same pressures from inflation and recession will likely increase the money supply, either through additional Treasury debt issuance or the Feds bond purchases in exchange for U.S. dollars.
Either way, increased liquidity in the markets tends to favor Bitcoin since investors may seek refuge in alternative assets to protect against “stagflation” — a situation marked by stagnant economic growth alongside rampant inflation.
Therefore, the DXY golden cross may not necessarily be a net negative for Bitcoin, particularly on longer timeframes.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
A popular crypto trader says that the US Dollar Index (DXY) is on the verge of a major dip after a multi-month rally. Pseudonymous analyst Bluntz tells his 224,800 followers on the social media platform X that the DXY may resume a downward trend after completing a key Elliott Wave theory pattern. The DXY is […]
The post Top Analyst Says ‘Major Decline’ Coming for US Dollar Index, Updates Outlook on Binance Coin (BNB) appeared first on The Daily Hodl.
China enacted a number of economic stimulus initiatives to bolster its stock market, but will there be a down-the-pipeline impact on Bitcoin?
News headlines have recently covered how China’s struggling economy poses significant risk to global growth. Economic activity and the flow of credit in the region are weakening, and analysts are not convinced that the Chinese government’s interventions are a sufficient fix for what appear to be structural problems.
For instance, industrial output in July increased by 3.7% compared to the previous year, which is slower than June’s growth rate of 4.4%. Furthermore, Chinese banks issued 89% fewer new loans in July versus June, the lowest since late 2009.
Beyond its impact on global economic growth, there’s concern among investors that the turmoil in China’s real estate market might trigger a ripple effect on the U.S. dollar and commodities. This, in turn, could create an unfavorable scenario for Bitcoin (BTC).
On Aug. 28, the Shanghai Shenzhen CSI 300 Index, a key indicator of the Chinese stock market, initially surged by 5.5% before ultimately closing the day with a 1.2% gain. Despite this improvement, Chinese shares continue to be among the poorest performers globally in equity indexes tracked by Bloomberg.
Bitcoin traders have valid concerns about potential repercussions from the Chinese stock market’s fluctuations. This unease arises from historical price trends and a broader shift in investor sentiment toward avoiding risk-on markets during periods of macroeconomic uncertainty.
As shown in the chart above, Bitcoin's price performance tends to align with the overall movement of China’s stock market, although these movements can be predicted or happen with a time lag. In fact, the 30-day correlation between the CSI 300 Index and Bitcoin/USD reached an unusually high 70% level on Aug. 28.
Interestingly, the recent surge in the stock market appears to be primarily driven by China’s measures announced on Aug. 27. According to Bloomberg, these measures reportedly included:
However, it quickly became evident that the measures, which were initially touted as economic stimulus, lacked the intended effect, according to Ting Lu, chief China economist at Nomura Holdings. He noted that these measures “fall short in halting the downward trend and their impact will be short-lived unless accompanied by support for the actual economy."
In addition to the CSI 300 Index's substantial 23.8% decline since July, there are clear signs of foreign capital fleeing Chinese stocks. Global funds sold around $1.1 billion worth of shares on Aug. 28 alone, contributing to August’s outflows exceeding $11 billion, potentially reaching a record level, as reported by Bloomberg.
The crucial question revolves around why China isn’t implementing effective economic stimulus packages. The answer may lie in the country’s currency value. The yuan’s value against the U.S. dollar has been consistently dropping, as depicted by the yuan price chart. This trend is concerning, as it indicates the currency reaching historically low levels.
Despite incentives like tax breaks, government bond buybacks and monetary distributions to the population, which can lead to increased money circulation and mounting debt, there’s a negative impact on the purchasing power of the yuan. The situation is complex and lacks an easy solution, possibly resulting in China experiencing significantly slower economic growth.
Interestingly, the primary beneficiary of the outflow from the Chinese stock market seems to be the stock market in the United States, ultimately strengthening the U.S. dollar. As capital flows away from Chinese equities, it tends to weaken the local currency, as investors seek lower-risk options like the S&P 500 index or U.S. money market funds.
Unfortunately, this scenario could present a challenge for Bitcoin, considering it’s priced in dollars and competes as an alternative store of value. For those anticipating a cryptocurrency rally due to a global economic downturn, it’s important to note that the U.S. dollar doesn’t need to be flawless; it only needs to outperform other competing fiat currencies.
Still, market dynamics can swiftly transform once investors recognize the potential overvaluation of the U.S. stock market or when indications of a looming moderate recession in the U.S. emerge, irrespective of the relative strength of the U.S. dollar against its counterparts. Consequently, the value of Bitcoin as an independent and alternative hedge remains valid regardless of being presently unable to reclaim the $29,000 support.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The co-founders of the crypto analytics firm Glassnode think Bitcoin (BTC) could soar toward a new all-time high faster than many analysts and traders expect. Glassnode co-founders Jan Happel and Yann Allemann, who share the Negentropic handle on the social media platform X, predict that the US dollar index (DXY) will peak at 106. The […]
The post Glassnode Founders Predict Bitcoin Will ‘Soar’ to New Highs Sooner Than Expected – Here’s Their Target appeared first on The Daily Hodl.
Traders believe that Bitcoin’s low volatility is a bull market signal, but their bias could be preventing them from acknowledging potentially negative macro outcomes.
The latest report from Glassnode Insights, titled "The Week On-Chain," emphasized that Bitcoin (BTC) has reached historically low levels of volatility. This has led to a mere 2.9% separation between the asset's Bollinger Bands, indicating an exceptionally narrow trading range.
This situation has only been observed twice in Bitcoin's history: in September 2016, when BTC traded near $604, and in January 2023, when the asset maintained a steady value of $16,800.
As outlined in the report, periods of reduced volatility, combined with investor fatigue, prompt the movement of coins based on their cost close to the current price. This implies that traders are likely making marginal profits or losses with their exits. The report concludes that establishing a new price range is necessary to stimulate fresh spending, potentially contributing to an anticipated increase in volatility.
The constrained range within which Bitcoin has traded – specifically, $29,050 to $29,775 over the past three weeks – is atypical and it does not require advanced mathematical analysis to understand. This has resulted in an exceptionally low annualized 30-day volatility of 17%. The key question is whether this trend is isolated to cryptocurrencies, or if it's a phenomenon also observed in the traditional markets, including stocks, oil, bonds and currencies.
Notice how the S&P 500 and oil price (WTI) 30-day volatility are currently at their lowest levels since November 2021. Interestingly, the DXY index didn't follow this trend, as the metric rose to 8% from 6% in May 2023. Additionally, the 10-year Treasury yield recently rose from its 18-month low of around 10% to the current 16%. These trends could have potentially influenced the decrease in Bitcoin's volatility.
According to Glassnode, there's a significant concentration of short-term holders' price distribution between $25,000 and $31,000. This pattern is reminiscent of similar periods during past bear market recoveries. However, the data shows that many of these investors are still holding positions with losses, creating short-term selling pressure.
Moreover, the analytics firm highlights a noteworthy drop in short-term holder supply to a multi-year low of 2.56 million BTC. On the flip side, the supply held by long-term holders has reached an all-time high of 14.6 million BTC, as mentioned in the report.
Assuming a relatively optimistic scenario where only 10% of the 1.77 million BTC held by long-term investors at $47,000 or higher change their positions before Bitcoin surpasses $40,000, this amounts to about 6 and a half months of the current mining output. This illustrates the importance of not disregarding the potential impact of a global economic recession on Bitcoin's price, beyond the fact that short-term holders are becoming scarce.
This hypothesis doesn't invalidate Glassnode’s idea of increased positions by "long-term conviction holders." Nevertheless, no historical data can account for the U.S. 10-year Treasury yields nearing their highest level in 16 years or the 30-year fixed average mortgage rate in the U.S. flirting with the 7% mark.
Despite the current trend, long-term holders still could flip their sentiment and actions in the advent of adverse economic conditions.
Higher yields in equities could attract investors, leading to possible volatility, while rising government and corporate borrowing costs might strain budgets and profitability. Concurrently, real estate markets might slow due to the impact on mortgage affordability. Such circumstances would likely compel central banks to implement fiscal policies to support economic activity, often resulting in upward inflation pressure.
Bitcoin's ascension as a $50 billion asset class occurred merely 6 years ago, making it uncertain how holders will react to the stress faced by some traditional markets. This contradicts the historically low volatility in the S&P 500, oil and Bitcoin markets.
This raises the question: could this tranquility be preceding a period of turmoil and will Bitcoin serve as a hedge against escalating inflation? Only time will provide the answers.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The co-founder of the crypto analytics firm Glassnode thinks the current macro environment offers a “perfect setup” for riskier assets like Bitcoin (BTC) to thrive. The pseudonymous analyst Negentropic tells his 55,800 Twitter followers that the U.S. Dollar Index (DXY) is losing steam, which he sees as a positive for Bitcoin. Negentropic also notes that […]
The post The Perfect Setup? Don’t Count on a Bitcoin Crash Back to $23,000, Says Glassnode Co-Founder – Here’s Why appeared first on The Daily Hodl.
Even with a price correction to $29,000, several Bitcoin price metrics show traders casting bets on a quick rebound.
On July 24, Bitcoin (BTC) experienced a flash crash, plummeting to $29,000 in a movement now attributed to significant BTC holders potentially liquidating their positions.
Amidst the crash and market uncertainty, Bitcoin's three major trading metrics continue to project a bullish outlook, signifying that professional traders have not reduced their leverage longs through the use of margin and derivatives.
Analytics firm Glassnode reported a surge in whales' inflow to exchanges, reaching its highest level in over three years at 41% of the total. This forceful sell-off from whales alarmed investors, especially in light of the absence of any significant negative events impacting Bitcoin in the past month.
Notably, a major concern stems from the ongoing court cases by the U.S. Securities and Exchange Commission (SEC) against leading exchanges, Binance and Coinbase. Still, there hasn’t been any major advancement on those cases, which will likely take years to settle.
Despite historical volatility, Bitcoin’s crash became more pronounced following 33 consecutive days of trading within a tight 5.7% daily range. The movement is further accentuated by the S&P 500 gaining 0.4%, crude oil rising by 2.4%, and the MSCI China stock market index surging by 2.2%.
However, it is essential to consider that the world's largest global reserve asset, gold, experienced a dip of 0.5% on July 24. Furthermore, the dollar strength index (DXY) reversed its two-month-long trend of devaluation against competing fiat currencies, climbing from 99.7 to 101.4 between July 18 and July 24.
The DXY index measures the strength of the U.S. dollar against a basket of foreign currencies, including the U.K. Pound, Euro, Japanese Yen, Swiss Franc and others. If investors believe that the U.S. Fed will manage a soft landing successfully, it makes sense to reduce exposure to gold and Bitcoin while increasing positions in the stock market. Lower odds of a recession can positively impact corporate earnings.
To understand whether Bitcoin’s price move down to $29,000 has successfully ruptured the market structure, one should analyze margin and derivatives markets. Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrency.
The margin lending of OKX traders based on the stablecoin/BTC ratio rose between July 22 and July 24, suggesting that professional traders added leveraged long positions despite the recent price crash.
Traders should corroborate this data with derivatives to ensure its market-wide impact. In healthy markets, BTC futures contracts typically trade at a 5 to 10% annualized premium, known as contango, which is not exclusive to crypto.
Notice how the indicator sustained a healthy 5.7% average annualized premium, slightly lower than two days prior but still within the neutral range. This data confirms the resilience of margin markets, but to gauge market sentiment further it’s also helpful to look at the options markets.
The 25% delta skew can reveal when arbitrage desks and market makers charge higher prices for protection against upside or downside movements. In short, a skew metric rising above 7% suggests traders anticipate a drop in Bitcoin's price, while periods of excitement generally yield a negative 7% skew.
The 25% delta skew remained negative, indicating that bullish call options were trading at a premium compared to protective puts. This further supports the thesis that professional traders remain unfazed by the flash crash, with no evidence indicating pessimism among whales and market makers.
All factors considered, irrespective of the rationale behind the price move on July 24, Bitcoin bears could not dampen investor optimism, resulting in higher odds of a recovery above $30,000 in the short term. Notably, the mere appreciation of the U.S. dollar does not impact Bitcoin's predictable monetary policy, censorship resistance and autonomous nature as a means of payment.
On the brighter side, there are some positive triggers on the horizon, including the possible approval of a spot Bitcoin ETF and gaining regulatory clarity. Proof of this comes from a recent U.S. bill introduced on July 20 that seeks to establish a clear process for determining the classification of digital assets as commodities or securities. If the bill becomes law, it would give the Commodity Futures Trading Commission (CFTC) authority over digital commodities.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
