Bitcoin continues its tumultuous August with volatility set to increase as it starts the week by dropping below $60,000.
Bitcoin (BTC) price action, which showed a dramatic recovery after crashing to a six-month low, is trying to regain its bullish momentum.
Who will be in control going forward?
The stage is already set for a fierce battle between bulls and bears, but there are plenty of factors that could drive volatility and provide some surprises.
The most important of these comes from outside the crypto world in the form of US macroeconomic data.
Amid the debate over how the Federal Reserve will handle global market instability, the July Consumer Price Index (CPI) is getting the attention of analysts.
The CPI, due out on August 14, will be released the day after the producer price index (PPI), while unemployment claims will be released throughout the week.
Meanwhile, for traders, the double “death cross” in BTC/USD is a stark reminder that even bull markets can have ugly moments.
The fundamentals of the Bitcoin network are also reacting to recent market turmoil, with mining difficulty expected to drop for the first time in six weeks.
As Bitcoin and altcoins change, Cointelegraph takes a closer look at the key factors currently influencing the market.
BTC Price Movement “Across the Globe”
Bitcoin has seen volatility at the end of the week after a weekend of weakness, with the final minute decline attributed to manipulative actions by large traders.
According to data from Cointelegraph Markets Pro and TradingView, the closing price is just above $58,700, a small rebound from the $10,000 loss two weeks ago.
The Asian trading session on August 12 continued to be volatile, with a domestic low of $57,700 seen on Bitstamp.
Popular trader Zell responded to X saying, “The lower time frames are mixed across the board, but the weekly chart tells a different story.”
“165 days of mid-cycle integration. This cycle is not over.”
“We’re up a bit more than we expected, but a retest of 55k support is next. We’ll look for long setups in that area,” fellow trader Roman told X Followers as part of his recent market coverage.
Credible Crypto noted that bid liquidity on exchange order books is currently slightly above “untapped lows” near the $55,000 zone.
He wrote in part of the X post along with an explanatory chart: “Many people are watching the green long zone between 54.5-56.5k as there is local demand there and there are equal and untapped lows.”
“With that being said, the heatmap shows bids stacked right over that area, running ahead of the ‘ideal’ long zone.”
Credible Crypto acknowledged that the weekly closing price drop caused the open interest to reset.
“I wouldn’t be surprised if they ran the 54.5-56.5k section first and then reversed course before that,” he concluded.
Meanwhile, the latest data from monitoring resource CoinGlass showed that buyer liquidity was below $57,700 on August 12. Heavy selling pressure was concentrated at $61,000 and remained above.
Bitcoin bulls face two death crosses
Bitcoin managed to confirm two separate “death crosses” last week, a troubling situation that the trading community cannot afford to ignore.
As reported by Cointelegraph, it includes four trend lines: the 21-day, 50-day, 100-day, and 200-day simple moving averages (SMA).
The 21-day SMA, which has been slanting downwards for the past few days, crossed down below the 100-day line. The 50-day and 200-day lines followed suit.
“Bitcoin bulls couldn’t avoid a second death cross,” Keith Alan, co-founder of trading resource Material Indicators, confirmed in a video analysis piece he uploaded to X Comments on August 11.
Nonetheless, Alan explained that the death cross is “not the be-all and end-all” for the market, and bullish volatility could still offset its consequences.
“Again, we have to wait and see because the indicators are lagging,” he said.
Previously, renowned trader Benjamin Cowen argued that the daily close must be above $62,000 to avoid future desk cross problems.
VIX Volatility Remains Unstable as CPI Week Arrives
This week’s CPI and PPI numbers were probably released at the worst possible time for risk asset traders.
Inflation in the U.S. is expected to be further complicated by unexpected developments, and the Federal Reserve is already under pressure to cut rates at its next meeting in September.
The turmoil in Japan last week has put the Fed’s responsibility for its response at an all-time high, but so far it has maintained the status quo, sending interest rates to their highest levels in two decades.
“We’re in for a busy week ahead,” trading resource The Kobeissi Letter summarized in one of its latest X threads.
Kobeishi noted that the VIX volatility index continues to remain elevated after hitting its third-highest level on record last week.
However, the CPI itself is expected to continue to decline, which would allow the Fed to consider its all-important rate cut.
Charlie Villello, chief market strategist at wealth management firm Creative Planning, cited fuel as a potential factor contributing to the Fed’s dovish stance.
He noted last week that “the national average for gas has dropped from $3.82 a gallon a year ago (down 10%) to $3.45 a gallon.”
“If this holds, it would likely be a factor in lowering the headline CPI for August (the Cleveland Fed is currently forecasting 2.7%, which would solidify the Fed’s rate cut.”
According to the latest data from CME Group’s FedWatch tool, as of August 12, the market is expecting a 0.25% and 0.5% cut in September with roughly the same probability. The latter was much more likely when volatility was at its highest around Japan.
Mining difficulties due to moderate retreat
It is now time for the fundamentals of the Bitcoin network to respond to the market turmoil of the past two weeks.
During that time, BTC/USD’s six-month low has retested $63,000, and the pair is currently somewhere in between.
Therefore, mining difficulty is expected to decrease slightly in the next automatic adjustment on August 14. According to estimates from monitoring resource BTC.com, this is around 3.5% at the time of writing.
This is the first decrease in difficulty in six weeks, but it is average for 2024, which has seen multiple decreases of 5% or more.
Meanwhile, hashrate continues to hit record highs, as confirmed by raw data from MiningPoolStats, highlighting an increasingly resilient mining sector that is already figuring out the post-halving environment.
Ki-Young Joo, CEO of cryptocurrency analysis platform CryptoQuant, analyzed data from U.S. mining companies and emphasized that the average cost of mining 1 BTC is still about $15,000 lower than the current spot price.
“The average cost of mining Bitcoin for US mining companies is around $43,000. Marathon Digital’s Q2 2024 report shows the average cost of mining BTC is $42,969,” he noted last week.
“This can be calculated using the operating hash rate, daily petahash cost, and average daily Bitcoin mining volume.”
Cryptocurrency Embraces Years of Sentimental Lows
As the cryptocurrency market changes, so do investor sentiments.
Related: Bitcoin Price Drops Below $59,000 as Institutions Stop Buying Stablecoins
The latest figures for the Crypto Fear & Greed Index are unusual, with the wild swings reflecting the volatile nature of market sentiment.
On August 6, Fear and Greed hit a low of 17/100, the lowest level since July 2022 and even surpassing the reaction to the FTX crash later that year.
The sentiment then shifted from “extreme fear” to neutral as the BTC price rebounded, dropping to 48/100 in a matter of days before declining again.
So as of August 12, cryptocurrencies are back in “extreme panic” despite the absence of a corresponding price drop.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.