The end of the week brings a sell-off in the crypto-currency market, which reacts with declines in the face of risk aversion ahead of Jerome Powell’s speech at the Jackson Hole conference. Digital assets again show a correlation with US index contracts, where a weakening of sentiment is visible before the opening of the session :
Bitcoin bounced from the $21,800 levels, with buyers failing to pull prices above $22,000. Ethereum is slipping below $1,630, yesterday the token was already trading above $1,700 ;
The price of the “king of crypto-currencies” is still below the 200 session moving average at $22,800. Bitcoin unexpectedly fell below the average last week, causing a cascading sell-off and the liquidation of bullish positions worth over $500 million. Demand has clearly weakened, with buyers clearly struggling to attack back above the average, which has gone from support to resistance;
Also of concern is the decline of major crypto-currencies below key on-chain levels, i.e. below the so-called realized price, which determines the average purchase price of a crypto-currency on the blockchain. This means that the vast majority of the market is now at a loss. While in the long term, dips below these levels have historically supported demand, in the short term, they have often been associated with weakening sentiment and an impending wave of panic;
Ethereum identified two major bugs before “The Merge” with a reward of up to $1 million from the Ethereum Foundation for identifying them and other major issues in the Ethereum code. Speculation has been circulating in the markets that the developers, faced with these bugs, may yet postpone the merge to the last minute. However, these reports have not been confirmed by ETH developers, so they should only be considered as unsubstantiated speculation;
Bitcoin miner capitulation has historically indicated the late stages of a bull market, prompting Charles Edwards founder of the Capriole fund in 2019 to create a “hash ribbons” indicator to identify crypto-currency buying opportunities. When the 30-day moving average of hash ribbons (the so-called death cross) falls below the 60-day moving average, we typically see miner capitulations. Thus, Edwards has reversed the indicator and suggests watching for a possible intersection of the 30-day average on the 60-day average, which heralds the return of miners to the market and potentially provides exposure to the “cheap” but returning in favor of bitcoin ;
Some analysts remain optimistic about bitcoin’s long-term valuation due to the observed capitulation of miners. The “hash ribbons” indicator is showing weakness. Since May 30, the 30-day average of hash ribbons has dropped from 7 to as much as 10 percent, confirming the decline in bitcoin’s network power due to the suspension of mining;
It seems that a short-term improvement in crypto market sentiment could be triggered by Powell’s surprisingly “dovish” speech, although this is not a likely scenario at this time, as the market is currently assessing. Expectations for a September rate hike have risen to 75 basis points, until recently the market assessed 50 basis points as more likely.
The average purchase price of the bitcoin blockchain (realized price) is currently around $21,700, bitcoin has not been able to stay above this level which has historically signaled weakness. It is worth noting the so-called Price Delta, which calculates the difference between the realized price and the historical average price of bitcoin. Currently, the Price Delta is at the $13,700 levels, which could prove to be the bottom of the current bull market, also due to the strong technical supports at these levels (including the 2019 bull market top). In the past, bull markets have often curbed declines only after hitting the price “delta.” Source: Glassnode
Investors in the bitcoin market are willing to make net losses despite the massive sell-off in the crypto-currency this year, illustrating the market’s continued gloomy sentiment towards risk assets and its vulnerability to external risk factors. By tracking the 90-day moving average, we can see that crypto-currency quotes tended to unwind only when the number of sellers proved to be low, yet the sell-off continues as confirmed by the August 21 sell-off. The market is dominated by short-term investors with a lower level of conviction and sensitivity to market volatility. Source: Glassnode
The “Fear and greed” index indicates fear, but the extreme levels are still relatively far away, which, in the event of further declines, leaves plenty of room for the weakening of sentiment to continue. Source: alternative.me
Bitcoin chart, H4 interval. The leading crypto-currency has fallen below a key support level, and the weakening RSI and Fibonacci levels indicate the potential for a downward move. Source: xStation5