BTC Miners End Capitulation – 5 Things to Know in Bitcoin This Week
Bitcoin (BTC) is starting another week fresh from a new multi-week low amid a return of very nervous sentiment.
After dipping below $21,000 over the weekend, the largest cryptocurrency is consolidating around 10% lower than a week ago, and the fear across crypto markets is clearly visible.
As some call for new lows and others warn of a difficult few months ahead, there is plenty for bulls to contend with on both long and short time frames
The US Federal Reserve’s annual Jackson Hole symposium is coming up this week, while September is already shaping up to be something of a showdown when it comes to inflation and associated macro price triggers.
That could mean new volatility across risk assets both below and earlier, something jaded investors will no doubt welcome after last week’s escapades on BTC/USD.
Related: 3 Reasons Bitcoin Price Bottom Isn’t In
At the same time, miners are giving strong signals that the worst is over, with the hashrate starting to recover from a rare “capitulation” phase.
With that in mind, Cointelegraph takes a closer look at five market movement themes relevant to Bitcoin traders in the coming days and beyond.
All eyes on Jackson Hole
The US Federal Reserve is once again in the driver’s seat this week when it comes to potential macro price triggers for risk assets.
Fresh from last week’s meeting of the Federal Open Markets Committee (FOMC), Fed officials, along with banking figures from around the world, will convene for the annual Jackson Hole Symposium on 25-27. August.
This year’s collection comes at a critical time for markets in the US and further afield. Inflation under the Fed’s jurisdiction appears to have begun to cool, while elsewhere the opposite story is true.
The latest US inflation data is still weeks away, but that may not stop Fed Chair Jerome Powell from giving strong hints about how the Fed will respond, as well as positioning expectations regarding future economic policy.
With that in mind, volatility can easily pick up both before and during the event, making Jackson Hole a key item to watch on traders’ radars.
“They’re so focused on doing this, partly just because they messed up last year with the whole ‘perishable’ thing, and they realize that the only thing they can do now is tighten policy, and that will slow inflation,” says Kevin Cummins , chief U.S. economist at NatWest Markets in Stamford, Connecticut, told Bloomberg.
With that, it remains to be seen whether the market will shift to favor another rate hike of 75 basis points in September or retreat towards a lower 50 basis point increase.
In a preview of the Jackson Hole comments circulates online Bank of America said it would “continue to look for 50bp rate hikes in September and November, plus a further 25bp hike in December.”
Interest rate increases themselves provide headwinds for risk assets, and in turn pose a challenge to Bitcoin and its attempts to escape strong correlation to asset classes such as US stocks.
BTC in for “ugly” six months
Bitcoin managed to fend off major volatility over the weekend, but still saw a new low for August as low-volume weekend trading conditions accentuated the market moves.
After the sudden decline on August 19, BTC/USD spent the following days making a low in an overall consolidation pattern, and this continued at the time of writing.
The low came in the form of a trip to $20,770 on Bitstamp, Bitcoin then added $1,000 before returning to trade roughly midway between the two values.
The weekly close of $21,500 was troublesome, marking the lowest since the week of July 18 after last week’s candle cost bulls nearly $3,000 or 11.6%.
Feels like $BTC preparing to go back under $20k soon.
Don’t be caught off guard.
— Ben Armstrong (@Bitboy_Crypto) 21 August 2022
Fearing a new low among commentators, others argued that conditions did not clearly indicate further misery.
For Cointelegraph contributor Michaël van de Poppe, BTC/USD could cap any fall on CME futures bars from August 19, which is around $21,200. More difficult for the majority of the market, he suggested, would be gains, given the general bias for the downside to enter.
“Probably around the CME open, we’ll see the markets drop to $21.2000 by the end of Friday, and then everything’s good,” he told Twitter followers this weekend.
“Still not inclined to see new lows. The total period of accumulation and strong correction on Friday causes panic. Pain is on the upside.”
Zooming out, however, Brian Beamish, founder of educational suite The Rational Trader, left social media under no illusions about how the rest of 2022 would shape up for Bitcoin.
“The next 12-19 weeks are going to be ugly,” part of one tweet read.
“Once that’s done, the floor for this cycle should be in – then we’ll start it all over again.”
Beamish drew on experience from two previous crypto bear markets, with a comparative price action chart suggesting that the real macro low was far off in BTC/USD.
Equally confident of a recovery over a longer period, however, was analyst Matthew Hyland, who argued that traders should not lose faith.
“Bitcoin structure over the coming weeks/months should not scare you. Either a higher low, double bottom or cycle low will form,” he in summary.
“The end is near.”
Hash bands show miners out of the capitulation phase
One group of Bitcoin network participants where an end to hard times seems demonstrably near are miners.
Despite the recent price drop, on-chain data now shows that Bitcoin miners have exited en masse a “capitulation period” lasting over two months.
According to the hash band metric, which uses two moving averages of hash rate to determine miner participation trends, it is now taking shape.
The move has been long overdue. Earlier in August, mining company Blockware predicted that the capitulation phase for hash tapes would end either this month or next.
The latest shift was noted by Charles Edwards, CEO of asset manager Capriole, who compared this year’s capitulation to others in Bitcoin’s history.
“The bitcoin miner capitulation has officially ended today, making it the third longest capitulation in history at 71 days,” he wrote in a Twitter thread.
“This capitulation zone was longer than 2021, and only two days shorter than 2018 when the price reached $3.1,000.”
A look at hashrate estimates from monitoring resource MiningPoolStats shows that a rise above 200 exahashes per second (EH/s) likely began in recent days.
“Historically, Bitcoin’s miner capitulations have captured large price declines and been good buy signals,” Edwards continued, echoing the classic Bitcoin market mantra, “price follows hash rate.”
“Miner capitulations occurring late cycle (at least 2 years after halving) and after cycle peaks have been the most profitable long-term signals (eg 2012, 2015, 2018).”
Currency balances reached new 4-year lows
Price competition on short time frames has proven to be somewhat of a non-issue for buyers this time around.
Behind the scenes, instead of fleeing BTC exposure, investors have been piling into the market at a noticeable pace in recent days.
According to data from on-chain analytics platform CryptoQuant, available Bitcoin on 21 major exchanges as of August 18 fell from 2,342,662 BTC to 2,309,727 BTC on August 22.
In four days, exchange users thus removed over 30,000 BTC from their accounts.
The collective data company Glassnode in the meantime added that the current combined balance across the exchanges it oversees hit a new four-year low on August 22.
In comparison, in August 2018, BTC/USD climbed towards $7,000, but still several months from the bottom of the $3,100 bear market.
The sentiment gauge drops 40% in one week
Compared to before the price drop, the sentiment on crypto is not what it was.
Related: Here are 5 cryptocurrencies with bullish setups that are on the verge of a breakout
Although exchanges are seeing an acceleration in BTC leaving their books, the overall picture is now one of “fear” when it comes to Bitcoin and altcoin investors.
According to the Crypto Fear & Greed Index, which uses a basket of factors to provide a normalized market sentiment score, “extreme fear” is just one step away.
At 29/100, the index is 4 points from a return to its extreme fear band, after reaching 27/100 over the weekend.
The latter represents a 40% drop in a single week – seven days earlier the index was at 45/100, registering its most upbeat levels since April.
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.
