Key Bitcoin takeaways
- Bitcoin starts the week with a sell-off.
- Traders move capital to Ethereum ahead of its London hard fork on August 4.
- Technical setup stress a bearish correction.
YEREVAN (CoinChapter.com) — After closing the previous week in positive territory despite a weekend sell-off session, Bitcoin (BTC) at best looked conflicted about its upcoming trade setup, partly because its closest competitor took the limelight ahead of a key upgrade event.
The BTC/USD exchange rate was down 0.38% to $39,713 after the New York opening bell, eyes a breakout move above the psychological resistance level of $40,000 while strengthening its footing near the $39,000-support. The moves have pushed the pair in a consolidation range.
Meanwhile, Ethereum’s native token Ether (ETH) popped higher in the days leading up to its long-awaited London hard fork. The upgrade, mostly famous for its EIP-1559 proposal that would burn a portion of ETH fees dedicated to miners, would likely make Ether a deflationary asset for the first time in history.
As a result, Ethereum has grabbed much of the market’s attention during this week’s open, leaving an otherwise positively correlated asset like Bitcoin in the shadows.
The Ethereum hard fork hype might continue until August 4, leaving Bitcoin’s upside attempts dry at best. Nevertheless, the market also anticipates a rebound in the latter half of the week, especially under macroeconomic influences.
On Friday, the US dollar index, which tracks the greenback’s strength against a basket of foreign currencies, fell to its two-month low of 92. The index’s weakness appeared out of the Federal Reserve Chairman Jerome Powell’s admittance that the US inflation had risen more than anticipated. Nonetheless, Powell reasserted that the rising consumer prices are transitory.
But investors did not follow up with the central bankers. That played a key role in boosting Bitcoin’s demand among inflation speculators. The prices also rose because of rumors that Amazon would start accepting cryptocurrency for payments.
A majority of those fundamentals have not gone anywhere. This week, the dollar expects to face more pressure than a few events listed on the US economic docket, including weekly jobless claims due for Thursday and the Prices Paid Index report this Tuesday. In addition, inflation concerns expect to boost the dollar’s interim demand. But long-term, investors might want to move away from the greenback and seek refuge in hedging assets like Bitcoin.
On Friday, the US Bureau of Labor will publish the nonfarm payrolls data for July. Powell said last week they still have some grounds to cover to achieve maximum employment in the US. As a result, it is likely for the Fed to continue its expansionary policies intact without fears of interim tapering. Bitcoin tends to be bullish in such an environment.
Across the Pacific, the Bank of England will announce its monetary policy decisions on Thursday.
Bitcoin technical setup
The latest pullback has brought Bitcoin back inside the $30,000-40,000 trading range. Therefore, the cryptocurrency would continue to trade under the fears of a further downside correction.
Therefore, if the sell-off continues, the BTC/USD exchange rate expects to test its 20-day exponential moving average (20-day EMA; the green wave) as its next support. A further correction and the pair could test the 50-day simple moving average (50-day SMA; the blue wave).
Conversely, a clear breakout above the $40,000-42,000 range could have bulls test $45,000 as their next upside target.