22 September 2023

Bitcoin has traded between the tight range of $26,400 and $27,500 this week and has specifically declined in value since yesterday. This has played out exactly how we predicted – that a BTC death cross would give short-term boost to prices but wouldn’t be enough to sustain a rally through the month.

US Fed’s press conference dampened financial markets as they held interest rates but indicated another rate hike before the year end. US dollar index, DXY, has showcased strength in the interim. Given all this, Bitcoin has, in fact, done well to hold its price in a range.

What is the likely effect of a surging DXY on BTC? Where is BTC dominance heading? What do on-chain metrics indicate? In our Hot Take today, we look at key trends that can define price action over the next month or so.

But before that…

Top-3 stories of the week:

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2

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The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.05 trillion - DOWN 1%

• Bitcoin price - $26,606 - UP 0.1%

• The dollar index (DXY) - 105.46 - UP 0.1%

• Bitcoin Dominance - 50.16% - UP 0.3%

• Crypto Fear and Greed Index - 39 - the market is in fear

ICO CALENDAR

• 25^th September - Tezos Domains (TED)

• 25^th September - TokoQrt (TQRT)

• 27^th September - Unice (UNICE)

THE HOT TAKE

Bitcoin price action trends bearish

While Bitcoin (BTC) and other crypto assets have a narrative and ecosystem backing them for the long term, they are not immune to macro-economic issues plaguing key economies globally. In general, the impact of a US interest rate hike would mean that money supply and liquidity may dry faster than anticipated. This could mean two things: one, new money coming into crypto will be a challenge, and two, existing holders could sell-off assets to pay-off mortgages etc.

Given that the US Fed funds rate is already above 5%, another increase can tighten the grab on money used for risk-on assets like Bitcoin. Bitcoin has, in fact, done exceedingly well to hold its $26,000-$28,000 range in recent weeks despite wider concerns.

But what’s in store for the near future? We track key trends that you must know to take an informed decision on your investments.

1) BTC is inversely correlated to DXY

As we see from the chart below, BTC has a negative correlation to the performance of DXY in general. DXY, from a low of about 100 in July, is now trending above 105. Naturally, BTC has dropped in value in this period.

While BTC holds above $26,000, it is still in a neutral territory in terms of outlook. There is always a chance that it can regain key resistances and rally beyond $28,200, where it turns bullish in terms of price action. However, any drop below $25,000 will lead it to a pivotal support zone which must hold to avoid a strong capitulation in the near term.

This drop is more likely if DXY surges beyond 106-107 as the chart indicates.

2)  Ethereum is bleeding against Bitcoin 

ETH has shown incredible strength against BTC post its Merge in 2022. However, of late, it is slowly bleeding value by forming lower highs and lower lows in a descending wedge, a pattern indicative of a strong decline ahead. ETH/BTC has broken below 0.06 this week.

If its devaluation against BTC continues, ETH will likely test its July 2022 low of around 0.05 in near term. This also means that BTC dominance is gaining steadily after holding its support band. A BTC dominance target of 55% up from 50% is likely in the near term, which means ETH and other altcoins will likely lose value to the #1 crypto asset.

3)  BTC long term holders continue to accumulate

The percentage of Bitcoin’s supply held by long term holders is getting ready to breach 76%, an all-time high. Defined by Glassnode as wallets that have held their Bitcoin for at least 155 days, long term holders continue to add to their Bitcoin stacks despite the broader market conditions. Currently 75.8% of Bitcoin supply is held by long term holders, showing strong conviction in the asset class from experienced market participants.

4) We are 7 months away from a BTC halving

This is the most bullish narrative for Bitcoin today. Given the halving is seven months away, we believe that any short-term capitulation is, in fact, great buy zones for the long term. Experienced investors are probably waiting for this eventuality – to buy BTC six months before its halving and to hold it for two years for low-risk crypto-based gains.

If Bitcoin revisits $20,000 before end of the year, there will likely be a hoard of buyers who may step in to accumulate. This includes miners who are going hard to procure all the BTC they can get before the halving.

Bitcoin experienced an unprecedented surge in its hash rate this week, reaching over 500 exa-hash per second (eh/s), marking the most significant one-day increase in its history. This led to an increase in network difficulty by 5%, sixth largest raise this year indicating a strong environment for the network and growth in miner participation ahead of its halving.

Key takeaway

If there is one suggestion we have for crypto investors, it is patience. Having seen the worst of the bear market through two years, we need to be aware that one more scare is always around the corner before things look rosy again.

Things to ponder on –

• If long-term BTC holders are accumulating at current prices, maybe we should cost average some of our capital too?

• If a capitulation eventually comes, are we ready to cash in?

• If ETH and other altcoins are likely to lose value against BTC, is there a merit to investing in them in the short-term?

• If we want a risk-free approach, how can we go in search of finding the one altcoin that can rally despite wider macro-economic issues?

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do our own research before investing and seek independent legal/financial advice if you are unsure about the investments