US Dollar Reaches New 20-Year High – 5 Things to Know About Bitcoin This Week

Bitcoin (BTC) is heading into the first week of September on a rocky downhill road after the Jackson Hole rout in US markets.

After the US Federal Reserve stepped up hawkish comments on the inflation outlook, risky assets were sold across the board and crypto is still reeling.

A fairly non-volatile weekend did little to improve the mood, and BTC price action returned to focus on areas below $20,000.

In doing so, several weeks of upside have effectively disappeared and, in turn, traders and analysts expect a retest of the macro lows seen in June this year.

While all is now quiet on the Fed front until September’s rate hike decision, there is still plenty of room for upheaval as geopolitical uncertainty and inflation linger, the latter continuing to rise. increase in Europe.

However, like last week, Bitcoin looks fundamentally resilient as a network, with on-chain data telling a different story than price charts.

Cointelegraph takes a look at five factors to consider when wondering where BTC/USD might be headed in the coming days.

Spot price triggers a target of $18,000

Data from Cointelegraph Markets Pro and TradingView confirm no surprises in guessing what happened to BTC/USD in the last weekly close.

After a relatively quiet period of weekend trading, the pair sold off significantly at the end of August 28, resulting in the lowest weekly close since early July.

A red weekly candle of $2,000 thus sealed a miserable August for bulls, after an initial loss of $3,000 the previous week.

BTC/USD 1 week candle chart (Bitstamp). Source: Trading View

With days to go until the end of the monthly candle, the mood among analysts was understandably less than bullish in the short term.

“Hopefully we can see a rally this week, but the way stocks closed on Friday doesn’t look so hot,” trader Josh Rager summed up Twitter followers as part of a weekend update.

The popular Il Capo Crypto trading account nevertheless considered the possibility of a brief upward pressure before the downward trend continued.

Noting negative funding rates implying a bias in the derivatives market toward outright losses, he predicted that $23,000 could reappear first.

“A lot more people are expecting 19,000 than those expecting 23,000. Funding says it all. Plus, there’s plenty of juicy liquidity above 21k. Tighten those shorts,” he said. tweeted.

Respondent, Trader Mark Cullen Noted that traders “were adding more BTC shorts in the area between 20.1 and 20.3k.”

“There is a nice inefficiency above and another towards 20.9-21.1k. If it can break it will probably be a quick move up,” he added.

Amid various calls for $17,000 or lower, technical analyst Gert van Lagen gave a floor target of $17,500 for the daily chart.

From a slightly less cautious perspective, TMV Crypto meanwhile reported $18,400 as a high maturity area of ​​interest.

Traders brace for further declines in US stocks

Last week’s explosive speech by Fed Chairman Jerome Powell sent shockwaves through risky assets around the world.

By one tally, Powell’s eight-minute speech wiped more than $2 trillion from global stocks, including $1.25 trillion in the United States alone.

“At some point, as the monetary policy stance tightens further, it will likely become appropriate to slow the pace of increases,” Powell said.

“Restoring price stability will probably require maintaining a restrictive policy for some time. The historical record strongly cautions against premature policy easing.

Bitcoin and altcoins felt the pressure, with August 29 set to be something of a breakthrough trading session on Wall Street.

Speaking on Bloomberg Television, Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, warned that US stocks would fall further, with the S&P 500 expected to drop below 4,000 next.

On the other hand, crypto-focused Game of Trades argued that July’s inflation spike had already signaled a macro low in stocks.

Pointing to the cumulative data from the S&P, Game of Trades continued to assert that all was actually not as bad as it seemed.

“SP500 shows LOTS of underlying strength,” accompanying comments from the weekend Lily.

“The cumulative rise/decline line speaks to underlying strength in the market, which many investors fail to notice. Although the SP500 is within double digits of the ATH, the indicator has made new highs.

Even a drop to 3,900, another glimpse declaredwould preserve a “bullish formation”.

US dollar targets September 2002 levels

A key accompaniment to the upheaval in equities remains the strength of the US dollar this week.

A classic inversely correlated relationship, the performance of the dollar against risky assets is in the spotlight with the US Dollar Index (DXY) hitting new 20-year highs this week.

At the time of writing on August 29, these highs are still in play, with DXY hitting 109.47 in its highest peak since September 2002.

US Dollar Index (DXY) 1 hour candle chart. Source: Trading View

“If the dollar keeps going, it’s going to really break things up. It literally went parabolic,” Raoul Pal, founder of Global Macro Investor, repliedwarning that there was “literally nothing before 120” in terms of resistance on the DXY chart.

Cointelegraph contributor Michaël van de Poppe was also alarmed, including DXY as a factor creating a “moment of truth for the entire crypto market.”

The soaring dollar also hurt major fiat currencies, including the euro, which quickly fell below parity with the greenback through August 29.

The European Central Bank, as well as the Bank of Japan, were reluctant to initiate the same rate hike program as the Fed, which led to inflation continuing to climb over the summer.

EUR/USD 1 hour candle chart. Source: Trading View

MVRV-Z score slips back into green

Breaking back into its “buy” zone is a classic Bitcoin strength indicator that has caught macro bottoms throughout Bitcoin’s lifespan.

The MVRV-Z score indicator, which began to prepare analysts for a price bottom in July, is falling again, reaching its lowest in a month.

Bitcoin MVRV-Z scoreboard. Source: LookIntoBitcoin

MVRV-Z uses market capitalization and realized price to determine how close BTC/USD is to its “fair value”.

In July, it printed a potential BTC price floor of $15,600, while briefly exiting its buy zone before returning during the second half of August.

As Cointelegraph reported, the realized price — the average at which BTC supply last moved — now sits at around $21,600, data from on-chain analytics firm Glassnode confirms.

Bitcoin realized price chart. Source: Glassnode

‘Extreme fear’ is making a comeback

Unsurprisingly, Bitcoin’s return below $20,000 sent its main market sentiment gauge back to its most bearish category.

Related: Bitcoin Mining Difficulty Set for 8-Month Record Gains Despite BTC Price Drop

As of August 29, the Crypto Fear & Greed Index is back in “extreme fear” territory at 24/100.

Having reached as high as 47/100 during the relief rally, the index is now in the range that has characterized several months of 2022.

This year even saw its longest period of “extreme fear,” with lows of just 6/100 as the overall market sentiment score.

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

However, analyzing investor sentiment, on-chain research firm Santiment noted that high-volume investors were adding to their holdings rather than divesting.

“As Bitcoin danced around $20,000 this weekend, a positive sign is the growth in the number of key whale addresses,” he said. commented on a chart for August.

“There is a correlation between the price of $BTC and the number of addresses holding $100-10,000 BTC, and they have increased by 103 in the last 30 days.”

Still, others felt there was still some way to go before a real macro turning point was reached in crypto demand.

“True generational entry is not just when people are afraid to buy, but when they’re too broke to buy,” said on-chain analytics firm Material Indicators. recognized.

“Not there yet.”

Annotated chart of Bitcoin whale address growth. Source: Santiment/Twitter

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