Bitcoin (BTC) begins the second week of May 2022 by taking bear ghosts out of its past – how much worse could the image be for hodlers?
After falling to nearly $ 33,000, the largest cryptocurrency gives market participants, new and old, a run for their money, and the fear is palpable.
The brutal combination of macro characters, which will continue this week and beyond, forms the backdrop for some historic re-tests that no one wanted to see anymore.
As calls for capitulation continue, there is still a lack of agreement on how far BTC / USD could or should fall to sink to a convincing long-term bottom.
Cointelegraph is considering factors that will contribute to market developments in the coming days, while Bitcoin is approaching its 2022 low.
Six weeks closes in the red
No matter how you cut it, there’s little reason to be bullish when it comes to Bitcoin price charts this week.
The weekly closing on May 8 at $ 34,000 meant BTC / USD delivered its sixth weekly red candle in a row.
This feature of the chart has not been seen for nearly eight years – the last occurrence began in August 2014 – data from Cointelegraph Markets Pro and TradingView show.
Then, as now, Bitcoin was in the second year of its four-year halving cycle, after experiencing its first rejection peak in November 2013 at just over $ 1,000. This cycle, however, was different, because the peak of blowing was either not reached or was much more muted than the previous cycles.
Meanwhile, macro conditions have given rise to any hope of a late rise for most analysts, who now expect financial tightening by central banks around the world to keep risky assets like cryptocurrencies firmly under control.
Back on the chart, BTC / USD already lost over $ 4,000 or 11.1% in May.
Historically, the worst month in May was, in fact, last year, in which the pair lost 35.3%, according to data from a monitoring source on the Coinglass chain.
However, after April, the chances of a return are slim. For four years in a row before 2022, Bitcoin recorded a profit of at least 32% in April, but this year it recorded a loss of 17.3% – which is the worst recorded.
The BTC 100-week moving average is falling
As such, analysts ’advice when it comes to the short-term effect of the price of Bitcoin is practically unanimous as the week begins: be careful.
After a weekly close, BTC / USD continued to fall towards $ 30,000 at the time of writing, wanting to test $ 33,000 and the next January low of $ 31,800.
“Don’t try to catch this knife,” said an analyst at Material Indicators said his followers on Twitter along with a chart showing the disappearance of bidding support from the Binance order book.
The May 8 order book shows a large wall of bids in place of $ 33,000. This is set because the market quickly solved another wall of interest in buying at around $ 33,800, which shows the truth of the pressure on the sales side in the current environment.
“Historically, BTC’s $ 69.5 million supply liquidity would have served as support, but historically it also had a significant amount of liquidity below it. This does not seem to be the case here, ”Material Indicators added about that first line of defense.
Last week’s candlelight also led to Bitcoin falling below its 100-week moving average (WMA) for the first time since March 2020.
Then, as with some previous 100 WMA piercings, BTC / USD then set out to test 200 WMA as support. For the popular Twitter account Bitcoin Back, the implications are obvious this time around.
“Both previous times have led to capitulation before the 200-week moving average of 2014 and 2018.” wrote in part of his latest update.
“Today’s chart has a lot of differences compared to those two times, and those two times were very similar to each other.”
Blockchain Backer, however, added that he expects a “big dive” on May 8 after the latest display of weakness.
Meanwhile, as Cointelegraph recently reported, expectations long before the week closed were that Bitcoin would fall to or below $ 30,000 in the coming weeks.
The US CPI is ready to continue the story of inflation
The decline in Bitcoin in the first week of May was largely due to a wider macro weakness that is now firmly present in global markets.
Stocks are particularly problematic in this regard, as the constant correlation of cryptocurrencies with these indices makes for a bleak ride for investors.
Things peaked last week after the tightening of US Federal Reserve approvals, as the S&P 500 recorded its first five consecutive weekly decline since 2011.
Now, amid the ongoing conflict between Russia and Ukraine and related financial pressures, another force should return.
Inflation, which is already the highest in the U.S. since the early 1980s, will only get worse thanks to the effects of trade disruptions and sanctions on Russia.
Consumer price index (CPI) data for April will be released this week, and the figures are likely to reflect the scale of geopolitical turmoil like no other before it.
US President Joe Biden will speak on the issue of inflation on May 10 before the CPI is printed on May 11.
The CPI in March was 8.5%, while analytical circles are already saying that inflation could be at its peak now or in the near future.
“We expect inflation to peak this summer between 6% -7% and to retreat to 3% -4% next year without a recession. … We may have already noticed the first signs of high inflation, in a quarterly increase in several measures of prices and wages lower than the previous year. ” – @yardeni pic.twitter.com/4mXXxFvmIN
– Carl Quintanilla (@carlquintanilla) May 8, 2022
“The best scenario for the bottom for me would be a capitulation sometime in the next few days followed by a lower CPI printout than expected on Wednesday,” popular trading account Daan Crypto Trades claimed:
“That would be my sign to bet big.”
Large or small, CPI events have tended to provoke short-term BTC price volatility in recent months.
Calculation of capitulation
On the topic of “capitulation” – mass sales while investors panickedly sell their Bitcoin – data show that the temptation to launch could be strong.
Currently, more than 40% of Bitcoin stocks are held at a loss, and this is the largest share since April 2020, immediately after the fall of COVID-19.
7.7 million #Bitcoin currently sitting at a loss. This is the largest amount since April 15, 2020.
This is almost 41% of the total supply in circulation. pic.twitter.com/uXPR9PiJHT
– On-Chain College (@OnChainCollege) May 7, 2022
Then the real capitulation took place, as evidenced primarily by the price.
An analysis of unrealized gains and losses among owners at the time, as defined by on-chain analytics firm Glassnode, also confirmed the capitulation on March 16, 2020.
Just nine days later, the company’s net unrealized profit / loss metric came out of the “capitulation” zone and reached “hope – fear” – one nuance towards recovery.
Currently, the metric measures “optimism – anxiety” and travels down towards the territory of “hope – fear”.
The feeling falls into the bottom zone of the macro
It is no surprise that the overall mood of the crypto market has so far not benefited from the events of May.
Related: Top 5 cryptocurrencies to watch this week: BTC, ALGO, XMR, XTZ, THETA
However, according to the Crypto Fear & Greed Index, it was only this week that the reality of the situation hit most.
As of May 9, the classic sentiment meter measures 11/100, firmly in its category of “extreme fear” and also at levels historically formed at the bottom.
Crypto Fear & Greed halved in value in just two days.
The traditional equivalent of the financial market, the fear and greed index, began to deviate from the cryptocurrency, stable at 30/100, or “fear,” on May 9, even after last week’s chaos.
“With Bitcoin now back up to $ 33.9 thousand, the mood of traders has dropped to a six-week low,” research firm Santiment commented about the situation:
“Usually we prefer to see signs of capitulation like this, since weak hands leaving space are generally what it takes to make a truly significant leap.”
The views and opinions expressed here are solely those of the authors and do not necessarily reflect the views of Cointelegraph.com. Every move of investing and trading involves risk, you need to conduct your own research when making a decision.