Bitcoin has gone from bearish to bullish and back again this week. With price action dictated by macro assets — gold and equities — traders and analysts have had to weigh a basket of positives and negatives.
Given that no two weeks are ever the same in Bitcoin, performance — and the narratives it produces — often vary considerably from one week to the next.
The mood over the past five days changed almost constantly, as BTC/USD flipped from bearish to bullish, only to come full circle at land at $9,000 support.
Highs of closer to $9,500 were short lived as stocks tumbled, taking Bitcoin with them. Gold, on the other hand, continues to circle nine-year highs.
$9,000 is still holding at press time, a firm support level which has seen only brief violations since May.
Modern Consensus takes a look back at the main events of this week, summarizing what moved Bitcoin since Monday. Click the individual article links within the text to access more detailed content on Bitcoin’s price behavior.
Price follows fundamentals
This week began with Bitcoin’s network fundamentals looking increasingly at odds with comparatively weak price performance.
Hash rate, a key indicator of miner sentiment, hit its highest weekly average reading in history. At 123 quintillion hashes per second (EH/s), hash rate delivered a firm signal that miners were putting increasing amounts of computing power to work verifying the blockchain.
Hash rate is only an estimate and is impossible to calculate precisely, yet overall higher readings give a positive impression of Bitcoin mining profitability.
Along with hash rate, difficulty — a representation of how intensive it is to solve Bitcoin blockchain equations — is set to increase next week to reflect increasing competition.
Both trends put Bitcoin firmly in a “post-bear-market” context — extended hash rate and difficulty growth imply that a price floor has been set.
Previously, comparisons were being made to the period directly after the pit of the last bear market in December 2018. As the year ended, fundamentals picked up, followed four months later by a bull market which topped out at $13,800.
As Modern Consensus reported, a popular theory suggests that price follows hash rate in particular, subject to a moderate delay.
Nonetheless, not every metric was bullish this week. Ten-day realized volatility was conversely mimicking behavior last seen just before December 2018, and concerns were mounting that the continually diminishing volume and price volatility would soon come to an end.
Stocks and a “growing correlation” with gold
A topic of interest this week has been how Bitcoin reacts to external macro factors, specifically gold and the stock markets.
Since the March crash, when assets worldwide tumbled, Bitcoin has staged a recovery which has topped 150% returns versus the $3,600 bottom. Since then, however, its behavior has been mixed, sometimes copying stocks, while at other times failing to react or moving in the opposite direction.
This became known as the extent to which Bitcoin was “decoupling” from stocks. Different phases gave rise to different narratives — a non-correlated move triggered calls for BTC to become a new safe haven like gold, while copycat ups or downs buoyed analysts looking at long-term patterns.
PlanB, the creator of the stock-to-flow Bitcoin price forecasting model, reiterated that Bitcoin was in fact 95% correlated with the S&P 500 specifically. This firmly contrasted with the “decoupling” narrative.
This week, a sharp uptick for gold moved attention away from stocks towards potential correlation elsewhere.
On July 9, exchange LATOKEN described Bitcoin as showing “growing correlation” with gold, while a major Twitter survey of over 10,000 users delivered the overwhelming consensus that both assets would continue to move higher.
Short-term targets briefly turn bullish
A decisive push above resistance at $9,300 on Wednesday was an event which had a conspicuous impact on many traders’ short-term prognoses for Bitcoin.
$9,300 had proved an impossible barrier to break since June 24, with ranging price behavior stuck between that level and $9,000. Several brief dips into the $8,000 range sparked fears that, in the presence of diminishing volume, a larger drop was incoming.
The theory was reinforced by the lack of success in moving Bitcoin higher, either due to macro correlation of external factors such as news that PayPal may be implementing cryptocurrency support.
Instead of falling, however, Bitcoin appeared to react favorably to gold nearing nine-year highs above $1,800.
In daily trading, new highs of $9,480 appeared, leading analysts to set their sights on higher levels still. For popular trader filbfilb, the next target is “untapped liquidity” near $9,800.
The optimism did not last long — Thursday saw stock market losses trigger a drop to $9,180, before BTC/USD stabilized at around $9,200, proving that neither $9,300 nor the 50-day moving average at $9,350 held any sway as support.
$10,000 may also remain off the radar — in 2020, all attempts to beat resistance above there and flip $10,000 to support have met with failure. As noted by Modern Consensus, a corridor between $9,000 and $9,500 has proven a more reliable focal point.