Bitcoin (BTC) has started a new week and traders are licking their wounds after a 10% plunge.
Bitcoin’s price action is struggling to recover from the frenzied end of the first few days of the weekend, and fears could turn equally volatile in the coming days.
With $26,000 in the spotlight so far, theories are brewing about where Bitcoin is headed next.
A combination of factors will come together to play a role – with US macro data heating up again and the Federal Reserve delivering key commentary on the economy at its annual Jackson Hole Economic Symposium.
Meanwhile, within Bitcoin, short-term holders are now facing mounting unrealized losses, while losses on on-chain transactions are hitting new multi-year highs.
Emotions are down, but is the fear really justified?
Cointelegraph examines these topics and more ahead of Cryptocurrency Market Interest Week.
BTC order book ‘ghost town’ after OI is wiped out
Data from Cointelegraph Markets Pro and Cointelegraph Markets Pro show that while many expected volatility to start around the close of the week on Aug. 20, Bitcoin ended up having little impact. transaction view That said, $26,300 capped its upside.
The subsequent drop took the market back to the $26,000 mark at the time of writing.
After a chaotic week, traders and analysts remained highly cautious about the outlook, with sources citing various triggers for fresh downside risks.
Trading suite Decentrader says: “Traders are still spooked, expect more falls” wrote In the X update on August 21st.
Decentrader noted that traders took short positions across exchanges after a sharp drop in open interest during last week’s decline.
“The funds rate continues to be negative,” it added.
Maartunn, contributor to on-chain analytics platform CryptoQuant, describe Binance order book liquidity is considered a “ghost town”.
“This will open the door for volatility in case you missed it,” he suggested, alongside a chart showing liquidity and whale order volumes that monitor resource materials metrics.
Still, Maartunn believes there could be upside to the results given historical precedent.
“In the entire history of Bitcoin, there have been 11 occasions in which open interest has seen a similar drop to what it was three days ago. Of these eleven, eight resulted in a price increase, while three did not,” said another analysis. a part pointed out.
As Cointelegraph reported, overall long and short liquidation reached levels comparable to those seen after the FTX implosion in November 2022.
Bitcoin Traders Weigh ‘Consolidation Scenario’
The quiet weekend gave some traders pause for thought. They believe that Bitcoin may now open the door to a new phase of range-bound trading.
“Bitcoin fell back to the previous range. The most likely outcome next week is to continue trading in the range,” said popular trader CrypNuevo Tell X-subscribers.
“I would like to see a false dip to $25,700-$25,800 on Monday, followed by a easing rally into the mid-$27,000 range for the rest of the week.”
Fellow trader Crypto Tony saw weekend reclaiming of the local top of $26,300 as a call to action.
“Until then, I’m waiting for Bitcoin’s next move,” he said Summarize.
Maartunn also admitted that a period of BTC/USD consolidation is “not out of the question.”
Another possible situation is #bitcoin It is a consolidation period.
This is not impossible as we have witnessed this type of consolidation after major market moves many times in the past. pic.twitter.com/1jeRb6eJfL
— Maartun (@JA_Maartun) August 20, 2023
On a weekly time frame, trader Skew outlines all possible upside, downside and consolidation scenarios.
“Over the long term, consolidation will fluctuate between $25,000 and $30,000,” he said. comfirmed There are also explanatory diagrams on the side.
Crucial timing for Powell’s Jackson Hole speech
Despite a quiet week in US macroeconomic data releases, the next five days are poised for a major change in rhythm.
US initial jobless claims are due on August 24, followed by home sales and other data.
“Volatility is officially back,” financial commentary resource Kobeissi Letter concluded to X subscribers.
Main events this week:
1. Existing Home Sales Data – Tuesday
2. U.S. services PMI data – Wednesday
3. New Home Sales Data – Wednesday
4. Core Durable Goods Data – Thursday
5. Initial Jobless Claims – Thursday
6. Speech by Fed Chair Jerome Powell – Friday
Volatility is officially back.
— KobeissiLetter (@KobeissiLetter) August 20, 2023
However, the attention of traders and analysts is mainly on Federal Reserve Chairman Jerome Powell, who will take the stage at the annual Jackson Hole economic symposium on August 25.
Jackson Hole is the quintessential venue for market volatility, and given the current climate, this year’s event was no exception.
“The Fed’s annual Jackson Hole meeting is more important than ever this week,” Corbysy added.
Powell will speak alongside European Central Bank (ECB) President Christine Lagarde.
With the Nasdaq and S&P 500 joining cryptocurrencies in their weekly losses, historical patterns could still turn, as Jackson Hole has traditionally provided risk relief.
Stocks typically rise a week after Jackson Hole
Will this year follow that pattern, or will it be one of the outlier years of the sell-off? pic.twitter.com/QPST4p9HUs
— Markets and Chaos (@Mayhem4Markets) August 20, 2023
Popular trader and analyst Myles Johar is also hopeful, noting that unlike stocks and bitcoin, the stronger dollar faces an uphill struggle.
“SPX – uptrend, at support and oversold. BTC – uptrend, at support and oversold. DXY – downtrend, at resistance and overbought. US10Y – double top pattern, at resistance and overbought condition,” he explained to X number of subscribers.
“The queue is clear. After the correction, the bias for Bitcoin and stocks is vertically upward.”
Meanwhile, the stock put/call ratio has reached its highest level since early 2023, Kobeissi added, suggesting volatility could be imminent.
“Is the market bracing for a sharp correction, or is another short squeeze about to start?” it ask.
On-chain losses mount as speculators feel the pinch
Not surprisingly, Bitcoin’s 11% drop resulted in a considerable shift in on-chain profitability metrics.
These include the Adjusted Spend Output Profit Ratio (aSOPR), which tracks the total profitability of all trades, excluding trades that are an hour or less in duration.
The “sales price to price paid” ratio is now back below 1 (the line between profit and loss), reaching its lowest level in five months, according to the data. data From on-chain analytics firm Glassnode.
glass nodes also disclose The seven-day average number of losses on unspent transaction outputs (UXTO) hit a three-year high.
At the time, BTC/USD retraced again in August, albeit a short-lived one, eventually hitting $10,000 in September before hitting new all-time highs later in 2020.
This time around, speculators are bearing most of the pain, with Bitcoin currently trading below the cost basis or realized price of short-term holders (STH), entities that hold BTC for less than 155 days.
familiar fear
Could Bitcoin Actually Be Less Soft Than The Market Believes?
Related: Is Bitcoin Heading For A ‘Bear Market’? $20,000 is back as a BTC price target
Sentiment data suggests knee-jerk reactions have been the defining reaction to recent bitcoin price action — and the dust may not have settled yet.
according to Crypto Fear and Greed IndexOrdinary cryptocurrency investors are more terrified now than at any time since the Silicon Valley Bank (SVB) collapse in March.
As the week begins, “Fear” scores just 38/100, with “Fear and Greed” dropping 16 points over the past seven days.
Meanwhile, trading team Stockmoney Lizards are among those calling for a more balanced approach to the status quo. It argues that Bitcoin’s price performance often suffers from the kind of flaws seen last week, making this month’s situation nothing new.
“Bitcoin sells off, everyone shouts 10k,” Summarize Over the weekend, commentary on the chart comparing the price action of the current halving cycle to the previous one.
“Bitcoin’s history is littered with sell-offs like this, and the market will recover from them as it has in the past.”
Well-known trader and analyst Rekt Capital conducted a further detailed analysis, pointing out that in 2023 alone, BTC/USD will see a decline of more than 20%.
all #BTC 2023 callback:
• Early February -12%
• Late February -22%
• March -9%
• April to June -20%
• July to August -12%bitcoin dollar #cryptocurrency #bitcoin pic.twitter.com/4pmBXPY0fp
— Rekt Capital (@rektcapital) August 17, 2023
Data from Monitoring Resources coin glass As of August 21, the loss for August 2023 is -10.8%.
This article does not contain investment advice or recommendations. Every investment and transaction involves risk, and readers should do their own research when making a decision.
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