5 Things to Watch for in Bitcoin After the Worst Month for BTC Prices in 10 Years

With May 2021 set to be the worst May ever for Bitcoin, the strongest hand is stronger than ever.


Bitcoin (BTC) begins a new week bearish or a firm “buy” depending on what happens next?

After a week of lukewarm price performance, the largest cryptocurrency remains stuck in the sub $30,000 range.

With inflation worrying traditional markets and summer traditionally favorable for bulls, there may still be reason for optimism. In Bitcoin, however, anything can happen and the surprises go both ways.

When considering where BTC might go next, Cointelegraph Markets considers the following 5 factors.

Inflation Spooks Macro Sentiment
It was a quiet day for stocks and commodities due to holidays in the US, UK and the rest of the West.

That said, Asian markets were mostly stable as traders prepared for the traditionally slower start to summer.

Zoom in, however, and things are decidedly less stable. The reason, sources tell the mainstream media, is inflation.

There is an international rebound from the coronavirus, driven by the massive liquidity created by central banks, in which there has long been concern about the long-term impact of the “recovery” on a global scale.

Some clear signs have emerged, such as a spike in manufacturing costs, which may not be fully reflected.

“Policymakers have committed to accepting higher levels of inflation, higher inflation volatility, and as that happens, you will see inflation move structurally higher,” Mixo Das, equity strategist at JPMorgan in Asia, told Bloomberg.

“I don’t think that’s in the price range yet.”

Coin World – 5 things to watch for in Bitcoin after the worst month for BTC prices in 10 years

Annotated chart of the Federal Reserve’s balance sheet. Source: PlanB/Twitter

Given the fixed supply and declining issuance curve of cryptocurrencies, inflation is by nature the antithesis of the Bitcoin standard and cannot be manipulated.

Demand from institutions and those with significant cash exposure should therefore continue to expand in line with inflation, which central banks are increasingly tolerant of.

During the debate on Bitcoin energy use earlier this month, Saifedean Ammous, author of The Bitcoin Standard, suggested that about 10% of global wealth is already being wiped out by inflation each year.

Short-term selling continues
Monday was a somewhat gloomy picture for bitcoin hoarders as the weekend failed to produce signs of a bullish price rally.

At the time of this writing, BTC is below $36,000 and has been slowly gloating downward since hitting a high of $41,000 last week.

These highs come shortly after another return to $30,000 support saw Bitcoin bounce back at $31,000, reverting to the familiar trading volatility since the “capitulation event (panic sell-off)” in early May.

Depending on who you ask, this setup is either a golden accumulation opportunity or a nightmare – and the split seems to match the market experience.

According to the latest data from Glassnode, an on-chain monitoring resource, at current levels, veteran hands are increasing their BTC positions, while newer buyers continue to sell to them.

This typical “weak hand to strong hand” direction is not new, but it is accelerating.

Miners have also resumed buying, reversing the brief spate of selling that accompanied the first drop to $30,000.

Coin World – 5 Things to Watch for in Bitcoin in the Worst Month for BTC Prices in 10 Years

Annotated chart of Bitcoin accumulation vs. BTC/USD. Source: Glassnode/Twitter

“This chart is crazy!” Twitter KOL Lark Davis responded, saying it underscores the excitement among long-term market participants.

“Miners and long term holders are accumulating, only short term holders are selling. This remains true after all these years.”

Bitcoin’s weekly Relative Strength Index (RSI), a key indicator used to predict overbought and oversold areas, is also circling lows, only to be penetrated by the March 2020 plunge and the December 2018 capitulation at $3,100.

Key price averages cause headaches for the bulls
In terms of bull or bear markets, there are “bottom lines” for traders and Bitcoin still needs to retain them to keep its bull crown.

In its latest market update, trading suite DecenTrader highlights the 200-day moving average (DMA) and the 20-week moving average (WMA) as important levels to watch.

The 200DMA currently sits above $40,000, which is where BTC’s price was blocked last week, while the 20WMA is higher around $49,000.

“If bitcoin finds enough demand below $30, the 20 WMA will hopefully become resistance,” concludes DecenTrader.

“A decline could make the $20 low or the 78.6% retracement a possible target. That makes next week’s price action especially important.”

Many disagree that bitcoin could fall to its 2017 high of $20,000, including PlanB, creator of the Stock Flow (S2F)-based price model.

While his model is still being “tested” by price volatility, he thinks the idea of a re-surrender to $20,000 is unlikely.

“Of course I disagree, S2F and the chain point to much higher prices ($100,000-$280,000). Time will tell,” he said in a Twitter discourse last week.

He added that the “actual price” of Bitcoin is calculated as the BTC price based on the last price each coin moved. It’s now at $23,000. The real price spiked by an order of magnitude during the bull markets of 2013 and 2017, and they haven’t been replicated this year.

“At $23,000, we still have some way to go,” he commented alongside a chart showing the already actual price with a 200 WMA.

Coin World – 5 Things to Watch for in Bitcoin in the Worst Month for BTC Price in 10 Years

Bitcoin’s actual price versus BTC/USD in the months leading up to the halving event. Data source: PlanB/Twitter

Funding Rates Ease Concerns
For some contrary views, a hidden bullish example, which may characterize the recent price action, lies in the FX funding rate.

It is currently healthy and negative, suggesting that in the current situation, it is likely that shorts are paying longs.

“Open positions have failed to recover and leveraged participants have been mostly wiped out in the sell-off and have not re-entered. Funding has also remained low/negative, which further echoes the market,” DecenTrader added.

As Cointelegraph reports, the capitulation of leveraged boomers during the $30,000 sell-off effectively reset the market composition as traders avoided risk.

This should allow for more real price growth, driven by real demand from those more likely to hold BTC for the long term rather than as short-term speculators.

Coin World – 5 Things to Watch for in Bitcoin After the Worst Month for BTC Prices in 10 Years

Bitcoin funding rate chart. Source: Bybt

Worst May Ever?
Is this the worst May ever? Looking at the monthly returns for bitcoin holders, it definitely looks like it.

On the last day of May 2021, sentiment is likely to be underwhelming, as monthly losses for hoarders total almost 40%.

Compared to the past, May tends to be a profitable month for BTC. For example, in 2017 and 2019, the pair made gains of more than 50% in May.

2018 was an exception, with a 19% loss, but even those are dwarfed by this year. 2021 May is now on track to be the worst performing month in the first and second quarters since 2013.

Coin World – 5 Things to Watch for in Bitcoin in the Worst Month for BTC Prices in 10 Years

Bitcoin monthly return percentages. Source: Bybt.com

Yet doom and gloom is far from ubiquitous. In addition to bitcoin, the alternative coin market showed signs of life, rising 13% on the day, led by a continued rally in XRP.

As traders pointed out, trading volume in the largest token, ETH, was particularly pleasing, in stark contrast to the behavior of bears, who tend to see little trading activity.

“We shouldn’t be bothered by the weakness in BTC as it could follow the stronger tokens back up or continue to fall/move sideways as token prices rise,” concluded trader Cypto Ed.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/5-things-to-watch-for-in-bitcoin-after-the-worst-month-for-btc-prices-in-10-years/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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