Bitcoin (BTC) starts a new week and a new month on a cautiously positive basis after protecting crucial levels.
After an intense July where macro factors produced significant volatility, BTC price action managed to provide both a weekly and monthly candle favoring the bulls.
The road to some sort of recovery continues, and at some points in recent weeks it looked like Bitcoin would suffer even harder on the back of June’s 40% loss.
Now, however, there is already a sense of optimism among analysts, but one thing remains clear – this “bear market rally” does not mean the end of the tunnel yet.
As summer 2022 enters its final month, Cointelegraph takes a look at the potential market triggers at play for Bitcoin, as it remains near its highest levels since mid-June.
The spot price pulls back the trend lines in the bear market
As for Bitcoin’s performance in July, things could have been much worse.
After June saw losses of nearly 40%, BTC/USD managed to end last month with respectable 16.8% gains, according to data from analytics resource Coinglass.
While those gains at one point exceeded 20%, July’s numbers are still Bitcoin’s best since October 2021 – before recent records of $69,000 were reached.
With a solid foundation in place, the question among analysts is now whether and how long the party can continue.
At D, W, M close, BTC closed D red. W & M closed green and Trend Precognition fired a new Long on M. It is tentative until the candle closes, but the fact that it closed above the 50 month MA makes it interesting to. Time to relax. Back to charts in the morning. pic.twitter.com/ImWjNcXx91
— Material Indicators (@MI_Algos) 1 August 2022
“First monthly close in the green since March,” popular trader and analyst Josh Rager black.
“After monthly closing above the 2017 all-time high from last cycle, price is slowly climbing higher. Looking good so far, and even though this is a ‘bear market’, I’m happy to buy dips right now.”
Others were more cautious, among them fellow trader and analyst Crypto Tony, who noted that the recent local highs just above $24,000 still served as unchallenged resistance on the day.
“I’m looking for a breakdown of this Bitcoin pattern and stay short while we’re below the $24,000 supply zone we rejected,” he confirmed to Twitter followers.
Nevertheless, the weekly and monthly close sealed some important levels as support for Bitcoin. Specifically, the 200-week moving average reversed from resistance on the weekly chart, and BTC/USD held its realized price, data from Cointelegraph Markets Pro and TradingView show.
In its latest weekly newsletter released last week, Blockchain infrastructure and cryptocurrency mining company Blockware also noted that a retracement of the 180-period exponential hull moving average (EHMA) of just under $22,000 on the monthly chart would be “quite bullish.”
“Monthly also looks set to regain its 180-week EHMA, a level we’ve been talking about for the past few months as a macro accumulation area for BTC. This closes Sunday night EST as well,” wrote Chief Insights Analyst William Clemente.
“If it recovers, it will be quite bullish as failed breakdowns/breakouts are a strong signal.”
Macro triggers cool for August
The macro picture that begins in August is a relief mixed with a feeling of mistrust about how the rest of the year might turn out.
In the short term, US stocks survived last month’s Federal Reserve-induced volatility to end July on a high. As Cointelegraph reported, calls for an extended rally in stocks are growing, which can only be good news for highly correlated crypto markets.
Analyzing the state of commodities, the popular Twitter account Game of Trades predicted that oil would soon lose ground, and that this would have a noticeable impact on US inflation.
Currently at more than forty-year highs, the consumer price index (CPI) is responsible for Fed rate hikes pushing risk assets across the board. A turnaround in inflation and thus Fed policy can thus quickly turn the tables.
“Big sellers went in for oil on Friday,” one post from the weekend read.
“Looks like oil is poised for a collapse, CPI takes its toll.”
The price of Brent oil falls as West eases efforts to contain Russian #oil trade w/#inflation and the energy risk increases. Plan to shut Moscow out of maritime insurance market delayed. pic.twitter.com/44Lne5P7qT
— Holger Zschaepitz (@Schuldensuehner) 1 August 2022
However, the global picture in terms of commodities is not so simple, and macro analyst Alex Krueger warns, on the contrary, that Europe’s energy crisis has not yet played out in market pricing.
For Bitcoin, the current rally is more of a “bear market rally” than a true return to strength.
“Yes, this is a bear market rally … for now,” Krueger wrote.
“The thing is, if inflation falls quickly enough, which is feasible, and Europe’s energy crisis isn’t exacerbated by a harsh winter, also possible, this could end up being the beginning of the bull market. No one knows yet.”
Krueger added that the status quo should remain until “at least the end of August” when new Fed events affect the market.
In order of importance, he listed the September policy rate decision, the September CPI, the Fed’s August 25 Jackson Hole summit and the August 10 July CPI printout.
Most upcoming important events, in order:
#1. September 22: FOMC
#2. September 13: CPI
#3. August 25: Jackson Hole
#4. August 10: CPI
Expect the markets to de-risk (sell-off) the days before each event if the market goes into them hot.
Then of course we have the infamous ETH merger around September 19th.
— Alex Krüger (@krugermacro) 30 July 2022
In terms of US dollar strength, the US Dollar Index (DXY) remained at its lowest level not seen in almost a month on the day, currently below 106.
For Game of Trades, the index was more significant than the numbers. After its parabolic uptrend, a clear directional change was now visible on the daily DXY chart.
“DXY has broken the parabola. There is only one way a broken parabola ends,” it commented.
The RSI raises questions about the price floor
In terms of on-chain signals, a rebound in one of Bitcoin’s core fundamentals hasn’t been enough to convince analyst Venturefounder that the BTC price bottom is in.
Zoom out to a multi-year perspective and comparing BTC/USD across market cycles, the popular content creator argued that Bitcoin’s Relative Strength Index (DXY) remains depressed after its April 2021 peak.
The RSI measures how overbought or oversold BTC/USD is at a certain price, and since May has seen the lowest readings ever.
Despite suggesting that Bitcoin is trading much lower than its true value, the RSI has yet to regain the “bullish momentum” that characterized the run past $20,000 and beyond in late 2020.
In April 2021, Bitcoin reached $58,000 before halving in price by the end of July.
“The only way to see the July 2022 low as the cycle bottom is if you were to see the April 2021 high as the cycle top for this cycle,” Venturefounder said.
“Bitcoin and Altcoins RSI and bullish momentum peaked in April 2021 and never recovered for the rest of this cycle. Do you think we bottomed out?”
Another conspicuous oversold period in the RSI came immediately after the March 2020 COVID-19 crash, this event significantly impacted price strength following the recent block subsidy halving.
BTC/USD, of course, never looked back, going on to regain its all-time high of the time around six months later.
Purpose ETF finally adds to holdings
Things may be looking for institutional Bitcoin engagement as subtle signs of recovery play out in statistics.
The latest such signal comes from the world’s first Bitcoin spot price exchange-traded fund (ETF), the Purpose Bitcoin ETF.
After the stock suddenly dropped by 50% in June, the product is finally adding BTC again, suggesting that demand is no longer falling.
Purpose added 2,600 BTC, which commentator Jan Wuestenfeld additionally noted ended several weeks of dormancy.
“Assets under management are still far from all-time highs,” he added.
However, the extraction trend is far from ubiquitous. A look at Grayscale Bitcoin Trust (GBTC) continues the troubling trend of lack of demand.
The fund’s premium to spot price, long actually a discount, is now rounding record low levels of almost 35%, data from Coinglass confirms.
Grayscale continues legal action against US regulators over their refusal to allow a spot Bitcoin ETF to launch domestically. GBTC would convert to such an ETF if conditions permitted.
New month, new fear
It was a nice ride, but sentiment in the crypto market is already back in the “fear” zone.
Related: Top 5 cryptocurrencies to watch this week: BTC, BNB, UNI, FIL, THETA
The latest measurements from the Crypto Fear & Greed Index confirm that “neutral” sentiment could hardly last a day, and that despite high prices, it is difficult to shake cold feet.
The index measures 33/100 as of August 1, still high compared to recent months, but already significantly below the highs of 42/100 seen just days ago.
For the analysis firm Santiment, however, there is still reason for optimism. The firm’s proprietary metric that governs transaction volume relative to the total network value for Bitcoin ended up in its own “neutral” territory in July.
The network value to transaction (NVT) token circulation model, after printing bullish divergences in May and June, thus came through at the last monthly close.
“With a neutral signal now that prices have risen and token circulation has fallen a bit, August could move in either direction,” Santiment summarized in a Twitter update on the latest numbers.
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 trade involves risk, you should do your own research when making a decision.