Bitcoin begins another trading week suspiciously calm, with weekend volatility next to nothing and the same $9,000 support remaining untested.
Amid conditions almost identical to last Monday, BTC/USD is still moving in a tight corridor between $9,000 and $9,500—what could change that?
Here’s our Monday morning look at the potential market forces that could send Bitcoin higher or lower in the coming days. We also publish a weekly markets roundup every Friday, the latest edition of which is available here.
Stocks, Bitcoin and compression
As previously noted, Bitcoin is currently exhibiting what has been termed “compression”—daily price action consists of closes at lower highs and higher lows.
The result is a narrowing wedge which analysts say is now coming to its apex—volatility can hardly decline any more.
July has already seen realized volatility reflect the status quo, with both Bitcoin’s 10-day and 30-day values hitting multi-year lows.
Which way BTC/USD will go when it does break the compression trend is the main topic of debate among analysts this week. Realized volatility combined with low volume has turned some bearish, a mood which has since nonetheless improved slightly.
“The 1 day chart shows Bitcoin still hasn’t reclaimed the 50 day MA which was my first objective[.] I would want to see c.$9350/400 before really starting to think that this thing has legs to move higher,” popular trader filbfilb summarized to Telegram channel subscribers on Monday.
He added that important support levels below $9,000, specifically the 20-week moving average at $8,250, remained firmly intact.
How much room for maneuver there will be will likely depend on macro movements, should they come, these in turn being highly impacted by Coronavirus measures from central banks and governments worldwide.
Futures mood improves as bulls eye gold
Continuing, filbfilb observed that bearish institutional traders, who two weeks ago were “relatively happy” being short BTC, were now starting to reduce their positions.
He wrote: “The CME Commitment of Traders report last week showed that institutions… slightly reduced their short exposure which appears to be offset by the pros and retail getting more bearish, this will be worth keeping an eye on.”
Beyond Bitcoin, there was meanwhile no hint of bearishness for gold, which pundits are tipping to climb even higher than its current levels of $1,813.
Despite trading at nine-year highs, XAU/USD has room for fresh gains, multiple commentators said at the start of the week.
The reason, as with stocks, lies in Coronavirus responses — lower interest rates and more money printing, especially of the US dollar, will drive gold interest.
“Based on a 2-3 year view, the gold price could still find support as central banks will likely keep interest rates at all-time lows to support a global recovery, and we have entered levels of unprecedented money creation by the U.S. Federal reserve, which may have knock-on effects on inflation,” Meryl Pick, a money manager at South Africa’s Old Mutual Investment Group, told Bloomberg.
As Modern Consensus recently reported, Bitcoin has yet to follow gold’s winning streak after March’s Coronavirus-induced crash. Despite this, year-to-date returns clearly beat the precious metal, at 28% versus 19% respectively.
Altcoins have their moment
Gold aside, Bitcoin is losing the limelight to altcoins this week. Fuelled by the Defi craze, returns on many other cryptocurrencies are outperforming BTC/USD.
With the familiar phrase “altseason” back circulating on social media, businesses are already reporting buoyant trading in non-Bitcoin markets.
In a blog post, Binance revealed that cross-exchange altcoin derivative volumes had exploded since June. From July 1, its altcoin perpetual futures volume has surged 150%, while its own futures volume has quadrupled to $2 billion per day.
“The unusual stagnation in Bitcoin’s price has shifted investors’ appetite towards altcoins as prices surged to new all-time highs. This explosion in Altcoin demand has ushered in an altcoin season, as seen by Bitcoin’s declining market capitalization dominance,” the blog post states.
Binance added that Bitcoin’s market cap dominance was now at its lowest in almost half a year:
“Bitcoin dominance has declined since hitting a high in the first week of May. Since then, Bitcoin has lost its dominance as Altcoin market capitalization gradually rose before a sharp surge in the first week of July. Today, Bitcoin dominance is at its lowest since February 2020.”
Perhaps coincidentally, altcoin Dogecoin received even more publicity in recent days, as Tesla CEO Elon Musk returned to tweeting about the meme-based altcoin.
Prior to that, users of Chinese social media network TikTok began posting support for DOGE, calling on investors to buy and in turn sending its price to almost two-year highs.