Bitcoin (BTC), which begins a new week, is still digesting the effects of the previous — a significant price drop that once saw $41,900.
A modest recovery is currently competing with some formidable resistance. The first is $50,000.
Markets are feeling a sense de déjà vu. Analysts are now coming to terms that Q4 2021 won’t produce the big-top they expected.
Another concern is that a deeper BTC price floor could be required before any real recovery can occur.
What is the likely outcome of the next few weeks? Cointelegraph looks at five factors that everyone should be paying attention to for the week ahead.
Ranging into “bullish” Q1 2022?
BTC/USD has fallen 16% from its Friday high of $50,000, but is back at $48,000 after close to $50,000 earlier in the weekend.
The maximum overnight loss on Friday against all-time highs $69,000 is 39%. This is significant but not record-breaking in Bitcoin terms.
______ ~40% Corrections 2W RSI Floor Breaks 2013 4 1 (bear confirmed) 2017 7 1 (bear confirmed) 2021 6 0 (excluding Mar 2020) pic.twitter.com/B1nwFEDwKP
— TechDev (@TechDev_52) December 5, 2021
The price predictions are fading fast and attention now turns to a possible revival in 2022.
William Clemente shared his prediction in a Twitter conversation: “For what it is worth, my base case involves that we consolidate/range until EOY, carve a regime of mixed negative funding rates/premium before bullish Q1,”
BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView
The sustainability of price recovery is a key focus for derivatives markets following their series of position liquidations.
Yesterday’s liquidation cascade was #BTC terms the second-largest single-day event in 2021, surpassing only the May 19 crash in sheer scale. pic.twitter.com/tRKPCJn6J8
— TXMC (@TXMCtrades) December 5, 2021
Friday’s events helped to “reset” Bitcoin futures open interest to levels last seen in September at the same price levels as the pit of the plunge.
Chart showing open interest for Bitcoin futures. Source: Coinglass
New CPI data and new Inflation woes
Macro markets are already at a knife-edge. However, this week’s fresh consumer price index data (CPI), may provide some fuel to the fire.
The November U.S. CPI readings are expected to surpass October’s shocking 6.2% year-on–year reading.
Lyn Alden, financial commentator who founded Lyn Alden Investment Strategy, noted economists’ prognoses. Lyn Alden, financial commentator and founder of Lyn Alden Investment Strategy, noted that housing, which was not present last month, would be a factor in the final results.
On average, economists expect next week’s CPI print on November 11th to be 6.7% (up from 6.2%) and 0.7% month-over month (down from 0.9%). pic.twitter.com/ljOEZQVDBz
— Lyn Alden (@LynAldenContact) December 5, 2021
Last week, inflation was back in the news after Jerome Powell (chair of the Federal Reserve) suggested that “transitory”, a description of it, wasn’t as appropriate.
Bitcoin reacted immediately, and bulls will be closely watching the new CPI data in hopes of a similar knee-jerk reaction to the October one.
Despite recent volatility, cryptocurrency is considered to be the best workaround for purchasing protection. Not least because inflation is much higher when assets that are not covered by CPI have been added in.
MicroStrategy CEO Michael Saylor warned that everyone has double-digit inflation, provided they measure it correctly, and that they use Bitcoin more than they think. Saylor is a well-known CPI critic within Bitcoin circles.
Public criticism has been levelled at the Fed’s central bank money printing.
“Can you guys stop printing more money?” Powell’s “transitory speech” was rebutted by Nayib Buukele, the President of El Salvador.
“Really. It’s simple.
Take care of the gap
Bitcoin is facing a “giant futures gap” this week. It may not close immediately but traders should be aware of it, according to Michael van de Poppe, a Cointelegraph contributor.
Futures could still be a target for positive momentum, even though derivatives traders are adding to the downside pressure over the weekend.
CME futures ended Friday at $53,545 — $5,000 more than spot prices at the time.
BTC/USD could rise in line with tradition to “fill” the gap, opening the door for at least $50,000 of support and a possible $1 trillion market cap.
Van de Poppe predicted Sunday that there would be a huge CME gap of $53.5K to Monday.
They close almost always, about 99% of the times. This is at least an important level to monitor in the coming weeks to see if Bitcoin continues to rise.
CME Bitcoin futures 1-hour candle charts showing gap Source: TradingView
The dip also closed the gap to the downside that had existed at the beginning of November.
Van de Poppe said that there were “minimal movements” on the markets over the weekend but that the volatility will kick in once the weekly opens and futures for the USA launch again.
As sentiment falls to 5-month lows, there are fresh echoes from March 2020
Although it’s only months since September’s price wobbles, the chaos of last week is drawing most comparisons with March 2020.
Coronavirus, which was then the backdrop of instability, caused BTC/USD to sell off in an egregious run of 60% within a week.
The stakes were lower this time, which led to the description of a “mini-rerun” this month.
$BTC is looking more like a miniaturized version of the March 2020 crash. pic.twitter.com/KtBGd4K83d
— Daan Crypto Trades (@DaanCrypto) December 5, 2021
One important difference is in the market composition. 18 months ago, leveraged trader and their impact on the markets was much less common.
Danny Scott, CEO at exchange CoinCorner, stated in a series tweets that “this Bitcoin dip was NOT driven to sentiment”.
“It was driven primarily by gamblers who leveraged and were liquidated. The sentiment is still very bullish.
Scott says that sentiment is still intact and believes the timing is helping to boost the positive mood. He hopes 2021 will end with a boom, not a bust. March 2020 saw a slow recovery after the lows, which was only eight months later.
The Crypto Fear & Greed Index meanwhile reveals the shock among many market participants. 16/100 marks both “extreme fear” as well as its lowest score since July.
Van de Poppe stated that the Index has not been as fearful since May’s crash.
“The sentiment is literally equivalent to a funeral. It’s a good idea.
Crypto Fear & Greed Index. Source: Alternative.me
Hash rate de facto at all-time highs
Bitcoin is not looking bearish in one aspect. Network fundamentals.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC. ETH. MATIC. ALGO. EGLD
Spot traders panic and mainstream media headlines about doomsday did not affect Bitcoin’s network activity. This highlights the long-term perspective of miners.
Even a drop to $42,000 did not compromise performance. The hash rate, which is a measure how much computing power is dedicated to the network, remains at near-all-time highs.
Highest hashrate since April pic.twitter.com/qYw2htrtVl
— Nico (@CryptoNTez) December 4, 2021
Different estimates provide different definitions of the highest Bitcoin hash rate.
According to MiningPolStats, the hash rate is at its highest ever sustained levels.
Chart of the Bitcoin hash rate. Source: MiningPoolStats
Blockchain’s average seven-day speed is currently 162 exahashes per minute (EH/s), while 18 EH/s are off the May pre-China crackdown record.
Chart of the 7-day average bitcoin hash rate. Source: Blockchain
However, it is still a common belief that spot price action will always follow trends in hashrate.
The difficulty that keeps Bitcoin in balance, regardless of changes in hash rates, will increase by just 1% over the next six days. The metric had been expected to decrease for the second consecutive period.