The Fed, the Merge and $ 22K BTC: 5 Things to Know About Bitcoin This Week

Bitcoin (BTC) starts a crucial week on solid footing as the bulls manage to wipe out weeks of losses.

After closing the last weekly candle at $ 21,800, the high since mid-August, BTC / USD is back on the radar as a long bet.

The end of a long period of downturns, interspersed with lateral price action, now seems to have finally come to an end, with volatility expected to form an important theme in the coming days.

In fact, a few weeks in Bitcoin’s history has been as hectic as this is likely to be.

In addition to the Ethereum (ETH) merger on September 15, the inflation trend in the US will be examined on September 13 with the release of the August Consumer Price Index (CPI) data. There is a recipe for unpredictability.

How will Bitcoin withstand the storm? While the macroeconomic picture looks confused for risky assets with the US dollar soaring, on-chain data continues to point to a price level already on the way.

Furthermore, the fundamentals of the Bitcoin network are poised to reach new all-time highs this week, underlining the resilience and recovery of miners, along with the belief in profitability.

Cointelegraph takes a look at many of the main areas to watch as Bitcoin gives “Septembear” a run for its money.

The solid weekly close boosts short-term BTC bets

The latest weekly close provided much-needed relief for Bitcoin bulls.

After weeks of miserable performance, BTC / USD has finally managed to seal convincing weekly gains, avoiding even a last minute correction in the close of the candle, as data from Cointelegraph Markets Pro and TradingView show.

1 week BTC / USD candlestick chart (Bitstamp). Source: TradingView

As such, just above $ 21,800, the 9/11 event formed a solid foundation for a week due to the significant volatility.

As of this writing, that level is forming a consolidation zone, coinciding with a major trend line in the form of Bitcoin’s realized price. According to chain analytics firm Glassnode, this is currently around $ 21,770.

Price chart made by Bitcoin. Source: Glassnode

BTC / USD still faces more significant bear market levels lost as support last month, chief among them the 200-week moving average, which is now close to $ 23,330.

A spike at $ 22,350 on Bitstamp overnight nevertheless attracted traders’ attention, encouraging existing requests to continue bullish.

“This was just a preliminary supply to 22300,” the popular Crypto Boss Twitter account he wrote in one of several recent updates.

“I still think 23k is likely. Then we see the reversal “.

A further tweet however he warned that “big resistances” are now coming into play on Bitcoin and altcoins.

“In my opinion, we will soon see a last leg up 5-7%, then LTF distribution, then nuclear power. Get ready,” he said.

In a sign of the impending start of volatility, fellow trader Cheds noticed that Bitcoin has tagged its upper Bollinger band on daily time frames, the bands are now slowly spreading to make way for a wider trading range.

1-day BTC / USD candlestick chart with Bollinger bands. Source: TradingView

The incoming CPI is combined with the decline in the dollar

One of the two main topics of discussion this week on BTC price action comes from a familiar source: the US Federal Reserve.

Consumer price index data is expected for August and hopes are based on the downward trend in inflation that continues after the July press showed a forming peak.

If so, it will be a boon to risky assets that will suffer heavily from the rise in the US dollar.

According to the CME Group’s FedWatch tool, the Fed’s Federal Open Markets Committee is still likely to make a repeated 75 basis point interest rate hike at its September meeting next week.

Fed target rate probabilities chart. Source: ECM Group

For dollar observers, however, there is already reason to believe that the return of risky assets should consolidate in the coming days.

The US dollar index (DXY), fresh from its 20-year high, fell nearly 2.7% in just four days.

“One thing that makes me doubt my downtrend for Bitcoin and Crypto in general even after the merger of ETH, is DXY,” analyst Mark Cullen, creator of the trading asset AlphaBTC, revealed.

“We see the potential for 3 units of [bear] Divergence formed on the RSI and the September FOMC is next Wednesday. I wonder if we see $ DXY breaking the parabola and increasing risk assets. “

Phoenix Copper executive Donald Pond has meanwhile called the USD and DXY chart “the most important around.”

“The dollar is too strong and it killed everything else,” he said tweeted in the day.

“It has fallen rapidly in the past few days, but is still in a strong uptrend. No sustainable rebound for the markets until the trend stops “.

1-day candlestick chart of the US dollar index (DXY). Source: TradingView

The union is here!

Complementing the encouraging inflation data is a purely internal price trigger: the Ethereum merger, expected around September 15.

The event, now set to come true after months of uncertainty, sees Ethereum as a network transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) as its hashing algorithm.

The hype has been building on social media and beyond, and now analysts are wondering what the immediate consequences will be, particularly if investors “sell the news” and drive markets to the downside immediately once the merger is complete.

In a dedicated update released on September 10, the Decentrader trading platform stressed the need for caution and avoiding a “bullish only” mentality.

“It is important to remember that there are multiple potential headwinds that could turn things in favor of the bears, namely bugs in the Merge code, a significant part of the Ethereum network that moves on a fork that carries market value, so like Macro Headwinds from the US August CPI data next week, “he wrote.

“It is also important to remember that, overall, there remains a systematic macro and geopolitical risk that could stop the more bullish narrative for ETH. Let’s see if the price can hold up after the merger.

Decentrader made comparisons with Bitcoin hard forks, which occurred in the second half of 2017 and thereafter. Now as then, the risk of distraction remains.

“In the long run, the merger has fundamental changes that we interpret as bullish for Ethereum, but the actual event will undoubtedly prove volatile as the market struggles between narratives,” the update concluded.

“Be very careful with scams, forks tokens, etc., we have already seen many on the Merge and ETHPoW forks.”

ETH / USD fell for a second consecutive day at the time of writing, aiming for $ 1,760 after hitting local highs of $ 1,790.

1 hour ETH / USD (Binance) candlestick chart. Source: TradingView

Difficulty, hash rates face all-time highs

The fundamentals of the Bitcoin network have been anything but bearish lately and this week this trend continues to reach new levels.

Both Bitcoin’s mining difficulty and hash rate have reached or are expected to reach new all-time highs in the next 48 hours starting September 12.

According to estimates by the monitoring resource BTC.com, the difficulty will increase by 3% at the next automatic readjustment, sending it further into unknown territory with a total of 31.91 trillion.

This follows the previous 9.26% jumbo readjustment two weeks ago, which constitutes the largest increase since 2021 and serves as a firm signal that competition from miners is healthier than ever.

Overview of the fundamentals of the Bitcoin network (screenshot). Source: BTC.com

Indeed, since their final “capitulation” phase concluded last month, according to data on the chain, miners have been scrambling to add hashing power to their operations. This is exemplified by the hash rate, the estimated combined hashing power of the Bitcoin network, which is reaching unprecedented levels in the past few days.

According to MiningPoolStats, that peak came on September 5 and resulted in a short trip at 298 exahash per second (EH / s). The hash rate currently hovers at just under 250 EH / s.

Reactinganalytics platform TheTIE meanwhile noted that the increase in hash rate has moved forward the timing for the next Bitcoin block subsidy halving event.

“As Bitcoin Hashrate rises to all-time highs, there is an important second order effect to remember: the Halving. Before that, it was slated for 2024, but now the expected date for the next $ BTC halving has been moved to the fourth quarter of 23, “he commented along with a hash rate chart.

Extreme fear turns out to be sticky

As bullish as the data and analytics appear to be, the global cryptocurrency market still can’t shake off the sense of foreboding.

Related: Cryptocurrency Traders Watch ATOM, APE, CHZ, and QNT As Bitcoin Shows Underlying Signals

The Crypto Fear & Greed Index, after a short flight to the upside, returned in “extreme fear” from 12 September to sign that a definitive trend change has yet to enter.

Index of fear and greed of cryptocurrencies (screenshot). Source: Alternative.me

The “extreme fear” is where the index spent most of 2022, including its longest consecutive period ever lasting more than two months.

For Santiment, a platform dedicated to the analysis of crypto sentiment, there was reason to be cautious thanks to the profit-taking activity on both Bitcoin and Ethereum.

“Bitcoin climbed above $ 22k today for the first time in over 3 weeks,” he said summary.

“The $ BTC profit-loss ratio is at its highest since March and it seems that many have seen this slight rebound as a trigger to trade again.”

Annotated chart for cryptocurrency profit-taking. Source: Santiment / Twitter

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