Market Analysis

Bitcoin (BTC) starts a new week in an altogether different mood as the weekly candle close brings a move higher.

The largest cryptocurrency, still stuck in a narrow range, is at last showing signs of life after several spikes to two-month lows.

With volatility back in play, traders nonetheless remain conflicted — can short-timeframe strength lead to an overall trend breakout?

Opinions differ as May comes to an end, and brings with it a macroeconomic showdown, which is already making itself felt — the United States debt ceiling deal.

With an agreement to raise the ceiling and avoid a U.S. government default almost here, risk assets may see relief across the board. Since stock markets are closed until May 30, however, it will be a game of “wait and see” for Bitcoin traders to start the week.

BItcoin itself, of course, is always open, and the debt ceiling appears to have formed an impetus for optimism despite representing little in terms of macroeconomic policy trends.

With that, the conversation within crypto is all about what happens next.

Cointelegraph takes a look at these and some other important factors to consider when it comes to BTC price action in the coming days.

Debt ceiling deal nears Congress

After several weeks of drama, the Biden administration has formed and presented a solution to the U.S. debt ceiling debacle and presented it to Congress.

While it remains unknown whether it will pass, bets are already frontrunning the outcome.

“I think it is virtually certain that it will be passed,” Jeremy Siegel, professor of finance at the University of Pennsylvania, told CNBC, summarizing a popular theory.

A true doom scenario, others have pointed out, is unlikely, as the deal stalling at this point does not immediately open the U.S. to a default scenario.

“The coming week will still bring uncertainty around the debt ceiling as the agreement makes its way through Congress,” trading firm Mosaic Asset continued in the latest edition of its newsletter series, “The Market Mosaic.”

“We’ll also get an updated report from the ISM on manufacturing sector activity, plus the May jobs report. Regardless of those headlines, I’m watching the action in the average stock and cyclical sectors most closely.”

News of the deal itself, meanwhile, worked instant magic on a lackluster BTC/USD, which saw some classic end-of-week volatility to briefly hit $28,450 overnight.

Currently trading at just below $28,000, the pair has managed to improve its outlook, even as it concerns the intraweek trend.

“Now that’s a really good BTC Weekly Close,” popular trader and analyst Rekt Capital responded.

“$BTC lost ~$27600 as support two weeks ago and now has positioned itself for a retest/reclaim of this same level.”

Rekt Capital had previously warned about a looming broader breakdown which could take BTC price action back toward $20,000.

“Dip into black would be healthy and successful retest there could position BTC for a revisit of ~$28800,” he now said, flagging the zone to hold in the event of a subsequent dip to support.

Analysis further raised the possibility of Bitcoin invalidating a recently-formed head and shoulders pattern on daily timeframes, this typically linked to the start of a long-term bearish phase.

“BTC is in a very early Bull Market,” Rekt Capital added.

CME gap guides BTC price dip bets

With that, Bitcoin is providing fuel for debate as bulls inch closer to testing the top of what has been a stubborn multi-month trading range.

Those betting on downside continuing this week have already been caught short — literally. Short traders saw $44 million of positions liquidated on May 28 alone, which according to monitoring resource CoinGlass represents a one-month high.

For well-known market participants, however, there is still cause to stay conservative on what comes next.

Trader Skew noted that Bitcoin’s weekend upside had opened up a gap in CME futures, with the implication that BTC/USD should dip lower to “fill” it at the open.

“Could see a sell off post debt ceiling deal & then gold / btc go on a run before the final rug,” part of Twitter commentary stated on May 29.

Fellow trader Mark Cullen noted that bid liquidity from nearer $25,000 had shifted higher, with traders anxious to get buy orders filled.

“Every time I do this I tend to kick myself as the would have been filled in the end,” he acknowledged, suggesting that a return toward that level remained on the table.

Trader Daan Crypto Trades meanwhile said that the battle for upside continuation was still ongoing, with a “key” resistance level still to be won.

A new milestone for Bitcoin difficulty

For Bitcoin network fundamentals, the trend is as decisively bullish as at any time this year — and new all-time highs are near.

Mining difficulty is due to add 2.5% on May 31, taking it over 50 trillion for the first time ever according to data resource BTC.com.

Add hash rate into the equation, itself circling the highest levels ever recorded, and the picture becomes clear regarding miner conviction and competition.

As noted by analytics firm Glassnode last week, meanwhile, miners have returned to hodling — increasing their overall BTC balances by retaining more BTC earnings than they sell.

“Following a large outflow of Bitcoin across the FTX implosion, Miners (excluding Patoshi and early unlabelled Miners) have expanded their balance sheet by +8.2K BTC, increasing their holdings to a total of 78.5K BTC,” it noted alongside a chart.

William Clemente, head of crypto research firm Reflexivity Research, meanwhile contrasted the current trend in hash rate versus spot price with Bitcoin’s 2019 price recovery.

As Cointelegraph often reports, a popular mantra still held by some longtime market participants focuses on spot price following hash rate on longer timeframes.

Hodl trend in “up only” mode

Onoing monitoring of Bitcoin hodlers produces few surprises — long-term investors refuse to sell, ferreting away more of the supply on a daily basis.

Less and less BTC is thus available for purchases as dedicated buyers send Glassnode’s “Hodled and Lost Coins” metric to multi-year highs.

At 7,725,079 BTC, these “Hodled and Lost Coins” now account for more BTC than at any time since May 2018.

This month, Cointelegraph reported on short-term price trends depending increasingly on the actions of short-term holders, typically correlated with speculative trading activity.

These investors, who have held BTC for 155 days or less, currently have a cost basis of $26,500, making that level a key, and so far successful, support zone.

Additional findings meanwhile reveal that there are also now more Bitcoin wallets with a non-zero address than ever before — over 47 million.

MACD crossover may spark 50% gains

The return of a 2023 bull signal is giving some pause for thought this week.

Related: Bitcoin holds 200-week average as trader says ‘inflection point’ is here

Moving Average Convergence Divergence (MACD), a bullish crossover, which was followed by at least 40% upside on two occasions this year, has just seen another such event.

The move was noted by popular trader, Captain Faibik, who confirmed the move occurring on May 27.

MACD subtracts the 26-period exponential moving average (EMA) from its 12-period equivalent.

A nine-day EMA of the result creates a so-called “signal line,” which when compared to the MACD value offers a form of Bitcoin top and bottom signal.

Magazine: ‘Moral responsibility’: Can blockchain really improve trust in AI?

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article was originally published by Cointelegraph.com. Read the original article here.

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