Bitcoin up 11%, what to expect this week?

Last Updated: 10 July 2022

Finally, bitcoin had another green week, rising 11% over the past 7 days and reaching a weekly high of 21,800 on Friday. In this article we highlight the most important data from last week and explain what that could mean for the short term.

Beautiful high

But before we hit you with difficult words and long numbers, let us first have a look at this beautiful price chart below. This is a textbook rise. Let’s hope the bitcoin price also shows its best side in the coming week.

Big buyers stirring

A major reason for the rise is that large players are opening their wallets and buying bitcoin. By large players, we mean wallet addresses holding between 10 and 100 bitcoin. Crypto analysis firm Santiment noticed that these large players have been showing this trend for five weeks. The start of this period coincides with the fall of Terra Luna.

During those five weeks, these players bought 52 thousand BTC, but the bitcoin price dropped by 27 percent.

Fewer sellers

The price in a free market is determined by buyers and sellers. Above, we mentioned that bitcoin is being bought in bulk, but what we also see is that less and less is being sold. The largest and most consistent group selling are miners. They find new bitcoins but must also sell some of them to pay their fixed costs. The lower the price, the more bitcoin they have to sell to cover their costs.

There is an indicator which monitors this behaviour. The bitcoin hash ribbon indicator attempts to recognise periods when miners are in distress, and need to sell to the point where they can no longer do so. The assumption is that such periods may occur when the bitcoin price has reached a low point.

As you can see on the far right above, we are in a second green period. There is a good chance the chart will turn white after this, as it has not happened before in bitcoin’s history that there are more than two consecutive orange-green periods. So far, this has always been followed by a return to white, and this transition has always been accompanied by a rising price.

Back above long-term trend

Big players are buying, and miners are mostly done with selling. This should be reflected in the price at some point, right? For this, we use the 200WMA-indicator, the yellow line on the chart below. This yellow line follows the moving average of the last 200 weeks, so it is a good long-term indicator.

Bitcoin is on the rise, and the price is now very close to a key indicator that analysts use. This is the 200 Week Moving Average. This is an indicator that adds up all the bitcoin weekly prices over the last 200 weeks and then averages them. Currently, the average of the past 200 weeks is 19,610, while the current price is around 21,000. So you could say that bitcoin is now doing better than the average of this long period.

In bitcoin’s history it is rare for the price to fall below this indicator. Above we have made three circles, and actually, the one of 2019 does not even belong to it. The price came close, but did not drop through it. It wasn’t until a year later, when the whole world was on lockdown due to the corona pandemic, that bitcoin dropped through the yellow line.

After Terra Luna failed, causing a domino effect in the market, bitcoin briefly dropped through the 200WMA again. This proved to be a perfect buying moment, as history shows that not only does the price recover quickly, but at this time, the market fear is at its lowest.

Market is becoming less fearful

That fear is captured by the Bitcoin Fear and Greed Index, which is also at a two-month high after rising to 20. There is still extreme fear, but the bottom seems to have been reached here as well.

A small note: The bottom seems to have been reached and the extreme fear is leaving the market. All the indicators above show that the trend is again somewhat positive, but they also all lean on a short history that is not representative enough for some investors. Unfortunately, this means that we can only tell you in retrospect whether all these indicators are holding.

Author

  • Florian Feidenfelder is a technical analyst with many years trading experience in the stock exchange and crypto markets. He has broad experience in forex trading, coaching, and funds management.

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