Bitcoin may have just experienced its biggest difficulty plunge in its history, but it is estimated that as miners continue to struggle, the next difficulty adjustment may even exceed this data.
After Bitcoin’s steady rise over the weekend ended in a fall, it started a new week in a familiar field. What will change this week?
With another rally near $36,000, Bitcoin is showing strength, but the old resistance levels still exist.
The conditions are complex. The ongoing migration of miners and related price actions have shocked many people, and Bitcoin’s most accurate forecasting tool has observed a real test.
However, as fundamentals finally show signs of recovery, the bulls may finally have something to celebrate.
Cointelegraph believes that five factors will play a role in BTC/USD this week.
Stock market records and oil battles
As the Standard & Poor’s 500 Index hit a record high for 7 consecutive days, the main market this week is again a ghastly “Roaring Twenties” mood.
Encouraging economic data in the United States, coupled with the Federal Reserve’s continued intervention, have pushed stock indexes higher in recent weeks.
Bloomberg quoted an explanation from Chris Iggo, chief investment officer of the core investment department of AXA Investment Management, headquartered in the Netherlands, and concluded: “The market is set to continue to build a better scenario.”
But an interesting change is that oil, which is currently at the center of another OPEC+ production, is also increasing, but it has raised concerns about how much fuel can be supplied in August.
As the U.S. dollar stabilizes, it seems that the stock narrative is a possible driving force in the future, and this situation has traditionally contributed to Bitcoin’s price action.
S&P 500 Index 1-day data chart; source: TradingView
Fundamentals are not out of the predicament
Bitcoin may have its biggest difficulty drop in history this weekend, but even so, it may not be enough to stabilize the situation.
27.94%, Saturday’s decline easily exceeded any previous one, reflecting the impact of China’s mining policy on the Bitcoin network.
However, according to data from the monitoring resource BTC.com, the next adjustment may see a greater decline.
Since difficulty adjustments can only be estimated before they actually happen, and there may be many changes in the difficulty period every two weeks, it is difficult to say how much this indicator needs to drop to reflect the true status of the network.
In view of the latest decline data, mining is now significantly more economically attractive to many current and potential participants. Therefore, in the next 13 days, more miners may begin to operate, increasing the hash rate, which may alleviate the need to further reduce the difficulty.
Hash rate activities in the last few days have shown that this phenomenon may have taken a turn. The hash rate has soared above 90 exahashes/s (EH/s), while the low point last week was 83 EH/s.
However, at the time of writing this article, the estimated difficulty of Bitcoin next time is adjusted to 28.68%.”After yesterday’s record-breaking difficulty adjustment of -27.9%, the difficulty of Bitcoin is now similar to the level after last year’s halving event,” the well-known Twitter account Dilution-proof pointed out next to an annotated difficulty chart on Sunday.”However, the 263% increase in the price of Bitcoin shows that Bitcoin mining has become very profitable for efficient miners.”
Bitcoin Difficulty 7-day moving average chart; source: Blockchain
Bitcoin price fluctuates at $36,000
There is at least a good time for the difficulty to fall-once it occurs, the price of Bitcoin will rise and climb to the upper limit of its trading range.
Throughout the weekend, BTC/USD saw little resistance, rising by about 5% before retracement.
BTC/USD 1-hour candlestick chart (Bitstamp); Source: TradingView
So, what can further limit enthusiasm? For the well-known analyst Rekt Capital, the now famous two moving averages (MAs) may be a sign of a bear market in the coming days.
As reported by Cointelegraph, BTC/USD had a “death cross” event last month. This refers to the 50-day moving average crossing below the 200-day moving average, which is traditionally considered a bearish signal.
In reality, “death crosses” do not always cause prices to fall, but its reputation has remained strong this year.
Now, if Bitcoin reaches MA (currently floating above the spot price), then the current price strength may taste reality.”Once BTC can break through $36,000… the next major resistance will be the ~$38,000 area,” Rekt Capital explained on Sunday, adding a summary chart.”This is not only the range high of the macro consolidation range that Bitcoin is now in… but the two BTC death cross EMAs (50 blue and 200 black) will also likely become a merger resistance there.”
BTC/USD annotation picture with “death cross”; source: Rekt Capital/ Twitter
In addition, trader Crypto Ed also warned on Monday that the weekend’s position would eventually be lost again.
He said: “A full-scale correction is coming,” he believes that the market needs to “appropriate retesting” of lower levels in order to promote a true bull market rebound.
BTC/USD corrected from a high of $35,900 and rebounded from $34,000. At the time of writing, this level is still maintained.
Volume failed to provide support for the bull market
The weekend’s rally is suspicious for those who pay attention to the classic market feature-volume.
Despite the rapid gains, the trading volume supporting them is still low. Therefore, their reliability and ability to sustain themselves have been questioned from the beginning.
On Monday, on-chain monitoring service CryptoQuant pointed out that transaction volume is still declining, indicating that major potential buyers still lack interest.
“Inflows and outflows are drying up with the volume of transactions in the market. The company said in a blog post: “It seems that the whales are keeping low and doing nothing.”Putting pressure on any party in the market is very likely to trigger a relatively large reaction to prices.”
Bitcoin transaction volume data chart; Source: CryptoQuant
However, on Saturday, statistician Willy Woo noticed that the number of Bitcoin entities holding large amounts of BTC has risen instantaneously-this is a typical signal of whales’ interest, and it also appeared after the difficulty was reduced.
As reported by Cointelegraph, the situation of other investors is also participating in the backup bitcoin supply, especially the so-called “Rick Astley” type, or the last hodler.
“Mr. Astley is saying’short sellers will be knocked down’,” Woo commented while adding supporting data.
Investor confidence is slowly recovering
How bearish are ordinary Bitcoin market participants now?
This question should traditionally be answered by the cryptocurrency fear and greed index. If you believe its readings this week, then things may not be so bad.
On Monday, the “Fear and Greed” index reached 29/100, the highest in nearly three weeks. When this happened last time, BTC/USD was heading towards the top of June, which was above US$41,000.
Fear and greed use a basket of factors to provide an estimate of the sentiment of the cryptocurrency market, thereby helping to identify whether an asset is overbought or oversold at a specific price.
Its bullish tops tend to reach 95/100 or more, leaving enough room for Bitcoin to grow before “extreme greed” enters and triggers a rout.
The index hit a low of 10/100 on June 22, or “extreme fear”, and then rebounded.
Cryptocurrency Fear and Greed Index 1-month chart; source: Alternative.me
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/will-the-mining-difficulty-drop-even-more-5-things-to-watch-for-bitcoin-this-week/
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