Traders brace for fireworks in July thanks to macro triggers while BTC price action is on track for a historic monthly close below the 200-week moving average.
Bitcoin (BTC) starts a new week above $20,000 but heading for a new bearish record as a key support level remains out of reach.
After a calm weekend punctuated by a brief spike to nearly $22,000, BTC/USD is back near the closing price of June 24 for CME futures markets.
A “round trip” thus allows traders to pick up where they left off at the end of last week’s final Wall Street trading session, but what could lie in store in the coming days?
A familiar cocktail of macro threats and ongoing bearish tendencies make the current climate far from ideal for the average hodler. Despite seeing some relief last week, crypto markets continue to bear the brunt of cold feet, which have defined macro sentiment increasingly throughout 2022.
With the June monthly close fast approaching, meanwhile, Bitcoin faces a few days of reckoning amid what could be its worst monthly performance since 2018.
Cryptowallcity takes a look at five potential market triggers for the week ahead as inflation rages, and crypto struggles to regain its footing.
Traders expect July to provide BTC price “catalysts”
“Apathetic” is a good word to describe the general sense of resignation among Bitcoin traders this week.
With the key 200-week moving average (WMA) out of reach, there is a precious little bullish sentiment out there, as evidenced by the “extreme fear” of the Crypto Fear & Greed Index still firmly in control.
“BTC will capitulate in the next 6 months & hit cycle bottom (anywhere between $14-21k), then chop around in $28-40k in most of 2023 and be at ~$40k again by next halving,” Venturefounder, contributing analyst at on-chain analytics platform CryptoQuant, summarized in part of a Twitter update on June 27.
Venturefounder’s thesis is indicative of a broader belief that the bottom is not yet in for Bitcoin, and that any relief moves are exactly that — distractions on the way to lower levels that suck capital out of market newbies and weak hands.
Expectations are that the first week of July could provide the next major bout of volatility across crypto and risk assets.
“Not much happening overnight on Bitcoin but am expecting quite a slow week due to the lack of catalysts currently,” popular trader Crypto Tony confirmed:
“July will be more of an action packed month for volatility due to the catalysts upcoming.”
For Arthur Hayes, former CEO of derivatives giant BitMEX, the first week of next month is a period where macro stars will align to punish hodlers once again.
In a blog post earlier in June, he flagged the United States Federal Reserve’s outsized rate hike and balance sheet reduction as providing the key backdrop to a risk asset nightmare.
“By June 30 (second quarter end), the Fed will have enacted a 75bps rate hike and begun shrinking its balance sheet. July 4 falls on a Monday, and is a federal and banking holiday. This is the perfect setup for yet another mega crypto dump,” Hayes warned.
A “wild ride to the downside” thus could be just days away.
As Cryptowallcity reported, popular consensus for a genuine price bottom focuses on the area between $14,000 and $16,000, but $11,000 has also made an appearance, this corresponding to an 84.5% drawdown versus Bitcoin’s most recent all-time high.
How normal is this bear?
While some panic sell their BTC, analysts are striving to show that so far, there is nothing unusual about the scope of the Bitcoin bear market.
Among them is on-chain analytics firm Glassnode, which in its recent research piece, “A Bear of Historic Proportions,” called for calm on sub-$20,000 BTC.
“Bear market lows have historically been established with BTC drawdowns of -75% to -84% from the ATH, and taking a duration of 260-days in 2019-20, to 410-days in 2015,” it wrote:
“With the current drawdown reaching -73.3% below the Nov-2021 ATH, and taking a duration between 227-days and 435-days, this bear market is now firmly within historical norms and magnitude.”
What singles out the current climate is not Bitcoin itself, but investors’ reactions to price changes.
Despite losses remaining within historical norms, sales of BTC at a loss have eclipsed previous records.
“The recent price collapse through to the $20k region was punctuated with the largest daily USD denominated realized loss in history,” Glassnode noted:
“Investors collectively locked in a loss of -$4.234B in a single day, which is a 22.5% increase from the previous record of $3.457B set in mid-2021.”
In BTC terms, the losses amount to the third-largest in Bitcoin’s history.
BTC risks first monthly close below 200WMA
With three days left before the June monthly close, things are either looking worrying or “interesting” for Bitcoin depending on one’s perspective.
With the bear market in full swing, BTC/USD remains below a key trendline that has supported it during previous macro lows. The 200-week moving average (WMA), which has never decreased in value, currently sits at $22,430.
In previous bear markets, as Cryptowallcity recently reported, Bitcoin has retained the 200WMA as support while wicking below it to put in floor prices.
This time, however, the level is flipping to resistance as bulls’ attempts to follow historical norms repeatedly fail. As such, the end of the month could be “interesting,” says Stock-to-Flow price model creator PlanB, as it would mark the first monthly close under the 200WMA ever.
An accompanying chart uploaded on June 26 shows Bitcoin’s relationship to the 200WMA versus the distance from its block halving events, these delineating the four-year cycles, which contain the bear market paradigms previously referred to.
Meanwhile, Checkmate, lead on-chain analyst at Glassnode, noted further unusual bearish traits currently characterizing the BTC price.
As Cryptowallcity recently reported, the Mayer Multiple shows how far the price is below its 200-day moving average and, thus, how likely a buy at a specific level would be to generate asymmetrical returns.
“Such events in the past have only occurred for 13 out of 4,360, representing 0.2% of all trading days,” Checkmate wrote in part of a tweet.