Bitcoin started another new week below $40,000, but it marked two major new milestones.
Over the weekend, unexpectedly, bitcoin got its first adoption in El Salvador and Paraguay.
With the world potentially seeing the first two “bitcoin countries” in history, many aspects are bullish, but can the bitcoin price trend catch up?
Cointelegraph breaks down five things that could change the status quo for BTC/USD in the coming days.
Yellen Says Rate Hikes “Are a Good Thing”
A cursory look at the broader macro environment reveals an interesting relationship between bitcoin traders and holders.
Inflation remains a hot topic in the U.S., and U.S. Treasury Secretary Janet Yellen has revealed that she would support a rate hike.
In an interview with Bloomberg over the weekend, Yellen said she supports President Joe Biden’s latest mega-spending plan and believes that even if the plan leads to inflation, it should be trusted.
She told Cointelegraph, “If we end up with a slightly higher level of interest rates, that’s actually a good thing from a societal and Federal Reserve perspective.”
Higher interest rates tend to increase bitcoin’s appeal as a deflationary asset, but with that comes a spike in the dollar this month, which generally pressures BTC/USD.
After rebounding from 90, the U.S. Dollar Index (DXY) is now busy recovering lost ground and reversing a downtrend that began in mid-March.
US Dollar Index (DXY) 1-day chart Source: TradingView
El Salvador and Paraguay Fail to Turn the Bitcoin Bull Market Around
Everyone in the Bitcoin community is talking about “El Salvador”.
Payment gateway Strike is starting to make significant progress in El Salvador, as the country’s president, Nayib Bukele, officially announced that he will submit a bill to parliament to make bitcoin legal tender.
If successful, El Salvador would be the first country on Earth to do so, effectively adopting something like a “Bitcoin standard.
Bukele confirmed his plan in a video presentation last week at the Bitcoin 2021 conference in Miami, where Strike CEO Jack Mallers outlined the plan.
However, the market was indifferent to the news, and then a congressman from Paraguay took to social media to suggest that bitcoin would be integrated into another world economy.
Carlitos Rejala tweeted on Monday, “Like I said a long time ago, our country needs to go hand in hand with the new generation. This moment has come, our moment.”
“This week we launched an important project to innovate Paraguay in front of the world! The price of bitcoin will go to the moon.”
Rejala also expressed his gratitude to Bukele for setting a “precedent.
However, according to Cointelegraph, there may be a price to pay for El Salvador’s acceptance of bitcoin. In response, commentators cited Bukele’s authoritarian leadership and the potential problems a dollar-based economy could pose in the early stages of Bitcoin adoption.
Caitlin Long, founder and CEO of Avanti Bank, believes there may be larger forces at play.
In a tweet about the move, she wrote, “Bitcoin is hacking into dictatorships as much as it is hacking into large tech companies.”
“Bitcoin doesn’t care why the president of El Salvador wants it to be legal tender – it doesn’t matter.”
Short interest numbers on the rise
Looking at the price action at the moment, anyone would be forgiven for flinching in the face of bitcoin on Monday.
Despite the massive hype generated by the Miami Bitcoin 2021 conference, the price of bitcoin is still adjusting sideways. So far no breakout has been signaled, except for some higher highs and higher lows that could drive the price higher.
Bitcoin has recently been trying to avoid entering a “contraction” wedge with near-zero volatility, but all attempts to do so have stalled.
At the time of this writing, bitcoin is trading slightly above $36,000.
There are some positive signs in some areas of the market as funding rates have fallen, but other areas have sounded alarm bells.
Raising concerns is the short-selling on the major exchange Bitfinex. As noted by prominent Twitter user Fomocap on Monday, historically, a rise in the number of shorts has coincided with huge volatility – usually a downward move.
“A sudden increase in Bitfinex shorts always means something. the number of shorts fell on Nov. 25, 2020, and rose on May 19,” he warned.
“This is rising again.”
Bitfinex Short vs. BTC/USD Annotated Chart Source: Fomocap / Twitter
This will cement fears that Bitcoin’s bearish move is not over yet. According to Cointelegraph, opinions are divided, with some waiting for Bitcoin to return to $20,000, while others are convinced that it will never get back to $20,000.
ETH/BTC to Form ‘Parabolic’ Uptrend
Bitcoin’s pain could be the rise of the cryptocurrency.
Despite the declining market cap of cryptocurrencies, some continue to rise and there is still hope for an opportunistic “cottage season.
Of particular interest this week is ethereum, where ETH/BTC is approaching its local high of 0.081 from last month.
ETH/BTC is currently at 0.076 and could break further. Kyle Davies, CEO of Three Arrows Capital, even described the next move in ETH/BTC as a “parabolic” rise.
Cobie, host of Blockfolio’s UpOnly talk show, replied, “If ETH and BTC haven’t peaked by the time the price of ETH/BTC reaches 0.2, I’ll give up all hope on the cryptocurrency.” He observed a general frustration among traders with the current price action.
ETH/BTC hit an all-time high of 0.123 in early 2018 and has since failed to approach that level again.
ETH/BTC 1-week candlestick chart (Bitstamp) Source: TradingView
Most of the top 50 cryptocurrencies by market cap rose slightly on Monday, while bitcoin underperformed, with outperformers including Solana (SOL) up 10% and Tezos (XTZ) up 12%.
Trader Josh Rager on Sunday predicted the outlook for SOL: “If ETH/BTC holds steady, SOL could see more upside.”
Miners’ capital outflows reach highest level in 2021
Bitcoin’s counting power has shown signs of recovery, rising slightly from 125 EH/s to 134 EH/s in recent days.
Mining difficulty is expected to drop by about 8% in the next automatic adjustment in five days to compensate for the shock to miners caused by recent market volatility.
Nonetheless, the data shows that miners who had remained firmly in bitcoin during the decline have cut their holdings last week.
As analyst William Clemente pointed out, the miners’ balance dropped by 5,000 BTC compared to a week ago, a major turnaround.
On June 3, 3,012 BTC left Poolin, the largest mining pool, in the largest single outflow of 2021. Another 2,501 BTC transferred a day later.
However, analyst Lex Moskovski said in a commentary that the bitcoins may not end up being sold.
He tweeted, “Even if this amount of money triples today’s outflow, it doesn’t bode well for a sale.”
Miners BTC Balance Chart Source: William Clemente/ Twitter
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