Bitcoin (BTC) enters the new week with a question mark about the fate of the market ahead of another key US monetary policy decision.

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After successfully closing the week – the highest level since mid-June – BTC/USD is much more cautious as the Federal Reserve prepares to raise its benchmark interest rates to fight inflation.

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While many hoped that the pair could break out of its recent trading range and continue rising, the weight of the Fed is clearly visible at the start of the week, adding pressure to an already fragile risk asset scene.

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This fragility is also showing up in the fundamentals of the Bitcoin network as the burden on miners becomes real and the true cost of mining in a bear market shows.

At the same time, there are encouraging signs in some network indicators, with long-term investors still refusing to give up.

Cryptooshala looks at possible market drivers this week in a busy week for cryptocurrencies, equities and more.

Fed to decide next rate hike in ‘another fun’ week

The plot of the week, other things being equal, is without a doubt the Federal Reserve’s interest rate hike.

A familiar story, the Federal Open Market Committee (FOMC) on July 26-27 will see politicians decide the extent of the next interest rate change, which is expected to be either 75 or 100 basis points.

Inflation in the US, as in many jurisdictions, is at its highest level in forty years, and its rise appears to have taken the establishment by surprise as calls for a peak run into more gains.

“There should be another interesting event,” said Blockware Lead Analyst William Clemente. summarize July 25th.

The interest rate decision is due on July 27 at 2:00 pm ET, a date in the diary that could well be accompanied by increased volatility in risky assets.

That could get worse, one analyst warned, due to low summer liquidity and buying uncertainty.

“Entering ECB/FOMC/Tech Earnings amid lowest liquidity in a year. The market returned to overbought. Bulls, so be it.” – Mac10 Twitter account. wrote.

In a previous post, Q2 earnings reports were also flagged as potentially contributing to the downside, in line with previous behavior.

“This year, BTC and risk assets rose at FOMC events only to sell off afterward, is it different this time?” colleague on analytical account Tedtalksmacro continuation.

“At the June FOMC meeting, the US Federal Reserve raised rates by 75 basis points, the most since 1994. An even bigger increase is expected before inflation ‘normalises’.”

The week is already different from last, even before things start to unfold – Asian markets are unchanged from last week’s bullishness that accompanied the bitcoin and altcoin resurgence.

While one argument is that the Fed can’t raise rates much more without derailing the economy, meanwhile Tedtalksmacro has pointed to the labor market as a target for further increases.

“Bitcoin will struggle to get above 28k until the data gets worse,” he said. added.

The spot price is not in line with the key moving average

Bitcoin’s last weekly close was something of a halfway house for bulls, according to data from Cryptooshala Markets Pro and trade view shows.

After improving on its best performance in a month, BTC/USD missed the opportunity to recover the all-important 200-week moving average (MA) at $22,800.

Hourly candlestick chart BTC/USD (Bitstamp). Source: Trading View

After the close, which occurred around $22,500, Bitcoin began to drop to the bottom of its most recent trading range, still holding below $22,000 at the time of writing.

“Watching if we find support at $21,666 horizontally. Patience”, popular trader Anbessa said Twitter followers in their latest update.

Meanwhile, account colleague Crypto Chase suggested that a return to the 200-week moving average would lead to further modest gains.

“Change in daily support/resistance (red square) with the inability to reverse 22.8k (daily resistance) to support. Repeated attempts to do this, but so far without success,” he said. wrote along with explanatory tables.

“If the price moves higher again and finds acceptance, I will be watching for 22.8k which will be support for a potential long entry to 23.2k.”

BUT late update viewed $21,200 as a potential bearish target, which also forms a support/resistance level on the daily chart.

However, at $21,900, Bitcoin is still about $1,200 higher from the same point a week ago.

BTC/USD (Bitstamp) weekly candlestick chart with 200-week MA. Source: Trading View

Elsewhere, the latest price movement was not enough to change long-term outlook. For Venturefounder, a member of the network analytics firm CryptoQuant, the macro bottom has yet to appear and it could be as low as $14,000.

“According to past halving cycles, this is still my most viable prediction for Bitcoin ahead of the next halving: BTC will capitulate in the next 6 months and bottom the cycle (somewhere between 14-21k 2023 and by the next halving will be again around $40k,” the forecast, originally made in June, retweeted. repeated.

Difficulty returns to March levels

In a sign that the miners’ troubles due to price drops may only be beginning, the Bitcoin network is now seeing turmoil.

ComplexityThe measure of competition among miners, which is adjusted based on participation, has been declining since the end of June and is now back at levels not seen since March.

The most recent adjustment was particularly notable, lowering the overall difficulty by 5% and heralding a change in miner activity. This was the largest single drop since May 2021, and the next one due in ten days is now estimated to reduce difficulty by another 2%.

Difficulty adjustment, perhaps the most important aspect of the Bitcoin network itself, also sets the stage for recovery by leveling the playing field for miners. The lower the difficulty, the “easier” – or less energy intensive – it is to mine BTC due to less competition overall.

In the meantime, however, data shows that the need to stay afloat remains a challenge. According to CryptoQuantumminers sent 909 BTC to exchanges on July 24 alone, the highest in a day since June 22 and a 5% decrease in difficulty.

Thus, changes for miners remain out of the picture this week.

An overview of the basics of the Bitcoin network (screenshot). Source: BTC.com

As Cryptooshala additionally reported, it is not only the price of BTC that is giving miners a hard time in the current environment.

Congratulations on the result of MVRV-Z

One of the hottest indicators of the Bitcoin network has just crossed perhaps the most important level – zero.

25 July Bitcoin MVRV-Z score returned to negative territory after a short week higher, thus entering the zone normally reserved for macro price lows.

MVRV-Z shows how overbought or oversold BTC is in relation to “fair value” and is popular for its uncanny ability to set a price floor.

Its return may signal a new period of price pressure, as bottoming accuracy has a two-week margin of error.

In early July, Cryptooshala reported that MVRV-Z is giving a worst-case scenario of $15,600 per BTC/USD this time around.

Sentiment cools off four-month highs

For the cryptocurrency market, the past week could very well have been a brief period of irrational exuberance, according to sentiment data.

Top 5 cryptocurrencies to watch this week: BTC, ETH, BCH, AXS, EOS

The latest figures from Crypto index of fear and greed show a steady decline from what was the most positive market sentiment since April.

As of July 25, the index is at 30/100, still described as “fear” driving overall sentiment, but still five points above the “extreme fear” level in which the market previously spent a record 73 days.

However, since mid-June, when Fear and Greed hit one of its lowest levels on record — just 6/100 — sentiment has returned.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Cryptooshala.com. Every investment and trading step involves risk, you should do your own research when making a decision.