CPI meets low BTC supply — 5 things to know in Bitcoin this week
2023.07.10 07:29
Bitcoin (BTC) begins a new week barely clinging to $30,000 as a “bearish divergence” sets the tone.
After a quiet weekend, BTC price action faces a potential pullback period within its broader bullish trend, traders say.
What could be on the menu for the market this week?
After a relative period of calm, external triggers are back for risk assets, with a slew of United States macroeconomic data releases combined with multiple speeches from Federal Reserve officials.
Add to that some interesting dynamics around U.S. BTC buying now in play, and the recipe for volatility is there.
Cointelegraph looks at these factors and more in the weekly rundown of what might move markets in the coming days.
Limp $30,000 support gets traders hungry for BTC price dip
Bitcoin may have closed the week at just over $30,000, confirmed by data from Cointelegraph Markets Pro and TradingView, but its strength now looks less convincing.
A dip into the $20,000 zone immediately afterward set the tone for traders, who believe that a retracement period could enter before upside resumes.
BTC/USD 1-hour chart. Source: TradingView
“Will be looking for trend continuation so another higher low between current price & $28K,” trader Skew explained in his short-term forecast.
“Else obvious weakness leads to a break in the 1W structure (Equal high & LL below $25K).”
BTC/USD annotated chart. Source: Skew/Twitter
Fellow trader Jelle eyed a warning sign on weekly timeframes.
“Bitcoin locked in a weekly bearish divergence overnight,” he told Twitter followers about relative strength index (RSI) behavior after the candle close.
“Time to play defense for a while. The bull market is coming, but pullbacks are part of the game. Bidding lower, let’s see.”
BTC/USD annotated chart with RSI. Source: Jelle/Twitter
For Crypto Tony, the downside could be limited to $29,500, this complementing a previous trip to new yearly highs the week prior.
“Sweep of $29,500 makes sense to me as the bulls just seem weaker and weaker right now. We have a sweep of the liquidity above us, so now it is time to grab the liquidity below us If you are not yet in a position, be sure to wait for this test and reclaim,” he summarized.
A further post zoomed out to predict up to 40% higher for BTC/USD in 2023, this nonetheless to be followed by a “bigger correction.”
BTC/USD annotated chart. Source: Crypto Tony/Twitter
8 Fed speakers accompany major macro data week
Macro commentators have their work cut out this week as the Consumer Price Index (CPI) leads U.S. economic data prints.
Due on July 12, CPI showing inflation dropping will go some way to lessening a still-hawkish Fed.
Markets almost unanimously agree that interest rates will rise again after last month’s pause, with trend-beating data apt to spark some last-minute uncertainty.
CPI will be followed by Producer Price Index (PPI) a day later, while a total of eight Fed officials will deliver remarks on the economy and policy.
“Volatility is set to return to markets this week,” financial commentary resource, The Kobeissi Letter, forecast while summarizing the calendar.
Fed Speakers This Week:
1. Fed Vice Chair Barr – Monday
2. FOMC Member Daly – Monday
3. FOMC Member Mester – Monday
4. FOMC Member Bostic – Monday
5. FOMC Member Bullard – Tuesday
6. FOMC Member Kashkari – Wednesday
7. FOMC Member Mester – Wednesday
8. Fed Board…— The Kobeissi Letter (@KobeissiLetter) July 9, 2023
The latest data from CME Group’s FedWatch Tool put rate hike odds at 92% at the time of writing, slightly down from last week’s 95% figure.
Fed target rate probabilities chart. Source: CME Group
Continuing, financial commentator Tedtalksmacro argued that core CPI would be the figure to watch for the Fed.
“Headline is expected to fall to 3.20% YoY, which would make for the lowest print since March 2021. The Cleveland Fed, University of Michigan + Truflation all anticipating a similar number,” he noted in part of a Twitter thread.
“Core CPI is expected to tick lower to 5.1% YoY, the lowest level since November 2021. Core remains the concern for the market, and I’d anticipate the market gives it more weight in it’s reaction on Wednesday.”
U.S. core CPI projections chart. Source: Tedtalksmacro/Twitter
Bitcoin mining difficulty following hash rate to fresh record high
In a refreshing turnaround, Bitcoin network fundamentals are gearing up to hit new all-time highs in the coming days.
The latest estimates from BTC.com predict that network difficulty will jump by more than 5% — its largest single upward adjustment since late March.
Bitcoin network fundamentals overview (screenshot). Source: BTC.com
Given stagnant price action, this is significant, speaking to ongoing competition in the mining sector and increasing belief in future profitability. In doing so, the difficulty will cancel out its previous dip to hit new record highs of around 53.2 trillion.
A similar story concerns hash rate, which by some estimations, crossed the 400 exahashes per second (EH/s) mark for the first time in recent days.
Bitcoin estimated total hash rate chart. Source: Blockchain.com
BTC price remains more than 50% below its 2021 peak, lending additional weight to the classic adage, “price follows hash rate.”
Commenting on what might come, Blockware mining analyst Joe Burnett suggested that Bitcoin would return to finish what it started after the 2020 breakout to pass its all-time highs three years earlier.
“During the 2017 bull run, there was no national mining ban that put half of the entire network hashrate out of business, and there were also no fake coins being sold by FTX, BlockFi, and Celsius,” he reasoned.
“Most are not ready for the next parabolic run.”
BTC supply shock “inevitable”
The recent filings for Bitcoin spot price exchange-traded funds (ETFs) in the U.S. has kickstarted a buying spree.
As Cointelegraph reported over the weekend, U.S. activity is back trending higher, vying with Asia when it comes to BTC supply ownership.
The implications for the dwindling supply become clear over longer periods, analysis argues, with just 7.5% of Bitcoin’s immutable 21 million coins left to mine.
“During this Bitcoin cycle, differently from the 3 previous cycles. the amount of Bitcoin available to trade decreased over time,” commentator Alessandro Ottaviani argued this weekend.
“If the trend continues, a supply shock is inevitable. It is only a matter of time, we just don’t know when. Being Bitcoiners, we can wait, because if we are Bitcoiners our Time Preference is low.”
Ottaviani uploaded a chart known as the “HODL Model” — a popular tool mapping supply availability versus price performance into the future.
Bitcoin HODL Model chart. Source: Alessandro Ottaviani/Twitter
On the topic of ETFs, notably that of the largest global asset manager, BlackRock, Ottaviani added that the mainstream narrative was already switching to condoning Bitcoin instead of bashing it.
1/5
The “Blackrock effect” in the Bitcoin is already started.
One of the effects can be seen in the Bitcoin mining world. In the same week we have noticed 4different articles in Forbes in favor of Bitcoin Mining. #Bitcoin pic.twitter.com/nXikYM8UtG
— Alessandro Ottaviani (@AlexOttaBTC) July 9, 2023
Big fish step up exposure
It is not just miners showing “confidence” when it comes to future Bitcoin profitability.
Related: AI has potential to send Bitcoin price over $750K — Arthur Hayes
As noted by research firm Santiment this weekend, the largest-volume Bitcoin investor cohorts are keenly buying, even amid stagnant BTC price conditions.
Since mid-June, so-called sharks and whales — entities with between 10 and 10,000 BTC — have increased their exposure by over 70,000 BTC.
“Bitcoin’s sharks and whales aren’t showing any signs of slowing down, even with prices beginning to get ‘boring’ in this $30k to $31k range,” Santiment commented.
“Since June 17th, 10 to 10k $BTC addresses have accumulated 71k more coins, equating to $2.15 billion.”
Bitcoin shark and whale data annotated chart. Source: Santiment/Twitter
Separate data from on-chain analytics firm Glassnode shows whale numbers — those with at least 1,000 BTC — at eight-month highs.
Bitcoin whale entities chart. Source: Glassnode
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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.
