Bitcoin Weekly Roundup: 5 Key Developments to Keep an Eye On

Bitcoin’s journey into the new week is marked by traders grappling with the aftermath of a swift 10% crash. The recent BTC price action struggles to regain ground after a tumultuous end to the previous week, and a sense of unease permeates the atmosphere as the market braces for potentially more volatility in the coming days.

The focal point for market attention stands at $26,000, with speculations rife about Bitcoin’s potential trajectory from here on out. A confluence of factors is poised to exert their influence — the resurgence of United States macroeconomic data prints and the upcoming annual Jackson Hole Economic Symposium, where the Federal Reserve will provide crucial insights into the state of the economy.

Within the realm of Bitcoin, short-term holders face mounting unrealized losses, and on-chain transactions experiencing losses reach multi-year highs. Sentiment has taken a hit, but the question lingers: is the prevailing fear truly warranted?

BTC Order Book’s Desolate State After Open Interest Wipeout The anticipated volatility around the weekly close on August 20 was not as explosive as many had predicted. Data sourced from TradingView reveals that Bitcoin’s upside was capped at $26,300, resulting in a subsequent pullback that brought the market back to the $26,000 level at the time of writing.

After a week of chaos, both traders and analysts remain cautious about the future outlook, citing various triggers for further downside potential. Trading suite Decentrader observed that traders are still wary, expecting more downward movement. The wipeout of open interest during the previous week’s drop left traders short across exchanges, while negative funding rates persist.

Maartunn, a contributor to the on-chain analytics platform CryptoQuant, characterized the liquidity of Binance’s order book as a “ghost town.” Despite this, historical patterns suggest that such conditions could pave the way for upward momentum, as eight out of eleven instances in Bitcoin’s history with similar Open Interest declines led to increased prices.

Bitcoin Traders Contemplate a “Consolidation Scenario” The relatively tranquil weekend gave rise to discussions among traders who speculated that Bitcoin might enter a new phase of range-bound trading. Some argue that Bitcoin could revisit its previous trading range, leading to a period of consolidation. However, opinions diverge on the exact trajectory, with some hoping for a false downward move followed by a bounce back to the mid-range.

Key Timing: Powell’s Jackson Hole Address While the past week saw a lack of significant US macroeconomic data releases, the upcoming week promises a shift in pace. Various data, including US jobless claims and home sales figures, will come to light leading up to Jerome Powell’s speech at the annual Jackson Hole Economic Symposium on August 25. Given the historical volatility associated with the event, Powell’s remarks are poised to impact the markets significantly.

Powell will be sharing the stage with notable speakers like Christine Lagarde, Chair of the European Central Bank (ECB). As both crypto and traditional markets face losses, the historical patterns linked to Jackson Hole’s impact could potentially be reversed this time, offering a relief from the current risk-off sentiment.

On-Chain Losses Mount Amidst Pressure Bitcoin’s recent 11% price drop has led to a substantial shake-up in on-chain profitability metrics. The adjusted Spent Output Profit Ratio (aSOPR), which tracks the profitability of transactions excluding those occurring within an hour, has fallen below 1. Additionally, the seven-day average number of unspent transaction outputs (UXTOs) in loss has reached a three-year high. This echoes a similar situation in August of the previous year, which was followed by a brief retracement and eventual new all-time highs.

Short-term holders are currently experiencing losses as Bitcoin trades below their cost basis. These developments underscore the significant impact of the recent price drop on speculators.

Navigating the Uncertainty While the current sentiment appears skewed towards fear, there are those who advocate for a more balanced perspective. The Crypto Fear & Greed Index indicates heightened fear among crypto investors, reminiscent of the response to past market events. The uncertainty surrounding recent price actions has left many on edge, and the dust is yet to settle.

Notably, trading team Stockmoney Lizards points out that Bitcoin’s history is punctuated by sell-offs similar to the recent one, suggesting a potential recovery as observed in the past. Similarly, experienced traders highlight multiple instances of 20%+ drawdowns in 2023 alone. While losses in August 2023 stand at -10.8% as of August 21 according to CoinGlass data, historical patterns remind us that the market has rebounded from such setbacks before.

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