Bitcoin commentary
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In-depth insights into the bitcoin market: Darren Chu, Founder of Tradable Patterns, shares his technical analysis on market movements, as well as exchange updates.
Bitcoin (BTC/USD) Consolidating Below 10k While Hash Rate Recovers
June 17
- Bitcoin (BTC/USD) continued its month plus post-halving consolidation, just above major downtrend resistance.
- With the weekly stochastics overbought, bulls should not rule out the increased risk of a deeper consolidation as bears increasingly monitor for a decisive rejection from the psychologically key 10k whole figure level.
- With BTC/USD just below a 3-month upchannel support, odds are elevated for a mild slide towards 8k over the next few weeks before forming a higher low and reclaiming downtrend resistance.
- The risk-off environment over the next several weeks will provide headwinds with BTC/USD’s correlation to the S&P500 near record highs. The S&P500 is vulnerable to a further slide on healthy profit taking after the massive bounce since the March lows. With the S&P500 appearing to fail in retesting its all-time high and dragging the Nasdaq100 back down to its February pre-COVID high, traders should monitor for meaningful pressure on BTC/USD.
- The weekly stochastics appear vulnerable to sliding from an overbought reading, with the weekly RSI and MACD consolidating.
- Bitcoin's 3rd halving completed on May 11, with the global hash rate recovering strongly from the post-halving low, down approximately 15%. The rebounding hash rate reflects an increased amount of miner investment and processing power used in producing Bitcoin. Active miners can access ultra-low electricity costs and are energy efficient in their consumption and hash production.
- Active miners have increasingly held onto their production post-halving, not sending BTC to exchanges, likely due to the unprofitability in selling BTC at current levels.
- With Bitcoin rewards (per data block validation on the Bitcoin network) going to miners now half what they were on May 11, traders are closely monitoring the increase in transaction fees to gauge the impact on production.
- Bitcoin's transaction activity for 2019 was at a record high, benefiting from inflows due to BTC/USD's perceived safe-haven status.
- Related to fiat currency devaluation pressures are the ongoing currency wars, and approximately 30% of global fixed income markets yielding negatively.
- BTC/USD's correlation with gold continues to fluctuate due to regulatory pressures, competitive threats from CBDCs and a greater perception of BTC/USD being a speculative market.
- Actual use of BTC/USD for micropayments has fallen since March 2019 on the Lightning Network, as incentives for those that operate network nodes are negligible, causing node operators to leave for Proof of Stake blockchains.
- Bitcoin is being increasingly tied to the Ethereum network for DeFi (Decentralized Finance) projects than for the Lightning Network, where smart contracts can digitally represent bitcoin.
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