Five Things to Follow in Bitcoin This Week
Bitcoin (BTC) starts a brand new week still trying to get to the $11,000 support line as macro markets shake over the recent health crisis and banks’ illegal activities. Here are five aspects that could mold BTC price action in the following days:
Banks See Money Laundering Spate
While central banks face major shifts in the United States economic policy, new leaked files showed more evidence of grand scale money laundering. A massive bunch of documents from the Financial Crimes Enforcement Network (FinCEN), called the FinCEN Files, found its way to inspect journalists across the world this month. The focus was clear: unnoticed criminal activities.
One instance involves HSBC, which kept allowing funds to move across its accounts despite being notified of their illegal origins – the bank’s shares dropped to 25-year lows on Monday.
Other evidence includes activity associated with the Russian elite using United Kingdom banks to evade Western sanctions. Bitcoin advocates were quick to emphasize the irony of the situation, considering the history of numerous banks in the files claiming that Bitcoin is a crime facilitator.
Central banks throughout the world keep dealing with coronavirus-brought issues, and the European Central Bank (ECB) will reportedly meet this week to agree to a response, as well as possible implications for the euro.
In the meantime, the Bank of England (BoE) is currently considering introducing negative interest rates for the first time since it was established.
Trading in Asia launched on a rather weak foot on Monday, with the Hing Kong Hang Seng Index down by 1.5 percent, as HSBC shares dropped to their lowest level since 1995. A similar situation happens in Europe, with the Stoxx Europe 600 down 1.6 percent.
In the United States before the opening, S&P 500 futures were down 1 percent. The U.S. encounters a mixed bunch of woes as politicians are trying to develop another, brand new coronavirus stimulus package and with the elections approaching.
This week, Federal Reserve Chair Jerome Powell is set to testify before Congress, after last week’s statement about the central bank’s incredible economic policy progress left many skeptical about its abilities.
“We do have concerns down the stretch about the markets reacting poorly to some of the uncertainties facing us — the election, potentially around Covid-19, and the fact that we don’t have a stimulus package yet,” Rebecca Felton, senior market strategist at global asset manager Riverfront Investment Group, told Bloomberg. “I would have to think we could be volatile to the downside here.”
Any issue dropping the U.S. dollar price is currently a boon for Bitcoin, which continues its inverse association with the U.S. dollar currency index (DXY). Today, gold was up 0.1 percent against the dollar at $1,953.
Bitcoin Fundamentals Register Unprecedented Highs
There was more fortunate news for Bitcoin analysts focusing on network strength this week as difficulty and hash rate remained at unprecedented highs. The difficulty, probably Bitcoin’s most important fundamental feature, went up by 11.35 percent at the latest automatic rebalance on Sunday.
As per estimates from BTC.com, the next readjustment in 12 days from now is already prone to add another 10.2 percent. The new upside emphasizes intense competition among Bitcoin miners to earn block rewards, which remain firmly constant at 6.25 BTC per block no matter how many are competing.
In the meantime, hash rate, an estimate of the total computing power operated by the Bitcoin network, registered a fresh record of 143 exahashes per second (EH/s) on Saturday. A widespread theory suggests that price bullishness follows fundamentals, and miners’ optimism regarding Bitcoin’s long-term profitability is now clear to see.
$11,000 Proves to be Challenging for BTC
BTC/USD remained rangebound throughout the weekend, failing to get to $11,000 and turn it into any type of support line. The ranging pattern continued from last week, during which Bitcoin managed to go higher from fundamental support at $10,000.
Markets analyst Michaël van de Poppe says that keeping $11,000 and the higher $11,200 as resistance suggests that Bitcoin will remain in the $10,000 zone for now.
“Given that we’ve got this rangebound construction, we have to check the lower timeframes, in which the most likely scenario is a case of testing the upper resistance zone of $11,200 to $11,400, and given the significance of this resistance zone, it’s unlikely that we’re going to break through it in one go,” he concluded in a Twitter update on Saturday.
BTC and USD managed to do just that, seeing rejection at just below the $11,000 level on Sunday. When it comes to further downside potential, if the lower support would pave the way, the open CME futures gap at $9,600 stays in play.
Analysts are still divided over whether the recent drop to $9,800 could be labeled as enough to ‘close’ the gap. Bitcoin may try to hit it definitively or keep the recent lows as a bottom.
Investors No Longer ‘Fear’ the $9,800 Line
As per the renowned Crypto Fear & Greed Index metric, the general feeling of the investors is widely recovering from the drop to below $10,000. On Monday, the Index, which considers numerous indicators to measure investor sentiment, was in the ‘neutral’ range of 48/100.
Prior to this, as Bitcoin stayed around $12,000, it measured almost its highest score ever, which was a warning that the market is set for a correction. And once that happened, a sense of auction was noticed, slowly adjusting through the past week to leave the Index at its current reading.
Eduard Watson Author
An experienced finance writer for more than 10 years, active industry watcher, and gadget enthusiast.