‘The bond market bubble has burst’: 5 things to know about Bitcoin this week

Bitcoin started the new week amid a tough macro environment after notching its lowest weekly close in nearly two years.

Bitcoin is on the back of weakness as risk assets take a hit to the global economy and the U.S. dollar surges.

September has now lived up to its unofficial nickname in the crypto market — “September Bear Market” — with BTC/USD falling 6.2% since the beginning of the month.

The bad news keeps coming for holders, who are increasingly holding onto their dormant Bitcoin as the dollar surges and mainstream investors’ appetite for diversification into riskier assets continues to evaporate.

This week, the macro situation will continue to be the focus of everyone’s attention. Cointelegraph analyzes the possible scenarios for BTC price trends.

The current economic situation is comparable to any major period of historical upheaval in the past century or so, and there are several factors to consider when evaluating where Bitcoin is headed next.

Weekly close takes BTC/USD back to November 2020

Data from Cointelegraph Markets Pro and TradingView show that although it did not reach the same level of decline as the previous week (3.1% vs. 11%), Bitcoin still recorded its lowest weekly close since November 2020 in the past seven days.

As the downtrend continues to arrive, Bitcoin will turn back time to the historical high before breaking through the last halving cycle.

BTC/USD one-week candlestick chart (Bitstamp) Source: TradingView

For the average holder, the feeling of déjà vu is unwelcome — the vast majority of Bitcoin bought and put into cold storage over the past two years is now losing value.

“BTC just recorded its lowest weekly close in this range,” SB Investments, a popular analyst on Twitter, summarized after the close.

“It looks bearish and the stock is looking to break support. But on the other hand, that’s what everyone expects.”

Whether the market will see a surprising “maximum pain” move to the upside is another key argument for Bitcoin holders. For well-known trader Omz, a weekly close of $18,800 even represents a convincing bottom.

Trader JACKIS pointed out a divergence in the relative strength index last week.

“We’ve only hit oversold territory twice in the past and they always marked bottoms accurately,” he tweeted at the time.

Another trading account, IncomeSharks, also insisted that a reversal could occur during the U.S. midterm elections in early November, but did not say a bottom had been reached.

“The medium-term rally remains in place as the double bottom and new support levels continue to build. Break this structure to eliminate these targets and find a new bottom.”

BTC/USD 4-hour candlestick chart (Bitstamp) Source: TradingView

US dollar causes heavy losses in stock markets, fiat currencies

Monday has barely begun and the turmoil that accompanied last week has already returned in the macro markets.

The unstoppable dollar is undermining the currencies of major trading partners, with the pound plunging 5% against the dollar at one point, close to parity with the greenback, its lowest level ever against the greenback.

Sterling is set to follow the euro and fall below the dollar, a plight that forced Japanese authorities to artificially prop up the yen last week.

GBP/USD 1-day candlestick chart Source: TradingView

The euro briefly fell below $0.96 before rebounding slightly, while the dollar remained close to its highest level since the 1990s against the yen despite Japanese intervention.

Meanwhile, global bonds are also sounding the alarm, with prices falling back to 2020 levels. Market commentator Holger Zschaepitz warned alongside Bloomberg data:

“It looks like the bubble in the bond market has burst. This week, the value of global bonds plunged another $1.2 trillion, bringing the total loss from all-time highs to $12.2 trillion.”

Stocks weren't faring much better, with futures falling a day before Wall Street opened. Brent crude fell below $85 a barrel for the first time since early 2022.

Saifedean Ammous, author of the bestselling books “The Bitcoin Standard” and “The Fiat Standard,” responded: “Global bonds denominated in fiat currencies are collapsing, the exchange rate of fiat currencies against the US dollar is also collapsing, and the US dollar is rapidly losing purchasing power.”

“It will take months, if not years, for the average fiat user to realize the magnitude of their financial losses. The ‘new normal’ is poverty.”

As the cryptocurrency remains highly correlated to the stock market and negatively correlated to the dollar’s ​​movements, the outlook for Bitcoin is less optimistic as the status quo appears set to remain in place.

Eurozone consumer price index (CPI) data, due this week, is expected to show inflation still rising, while the U.S. personal consumption expenditures price index (PCE) should continue the downward trend that began in July in the United States.

Meanwhile, the U.S. Dollar Index (DXY) has shown no signs of reversing course and is trading at its highest level since May 2002.

US Dollar Index (DXY) 1-month candlestick chart Source: TradingView

Holders are in classic bear market mode

Amid such chaos, it’s no surprise that confidence among Bitcoin holders is growing and long-term investors are refusing to sell.

Stubborn holding is the hallmark of a Bitcoin bear market, and the latest data shows that mentality has firmly returned this year.

According to data from on-chain analytics firm Glassnode, Bitcoin’s so-called CDD (coin days destroyed) metric is hitting new lows. When CDD is high, it means more long-term stored Bitcoin is moving.

Glassnode commented: “The number of coin burn days has actually reached an all-time low over the past 90 days.”

“This suggests that bitcoins held for months to years are the longest they have ever remained dormant.”

Bitcoin 90-day CDD annotated chart Source: Glassnode/Twitter

Glassnode also noted that it is increasingly common for Bitcoin to be held for at least three months as a percentage of the USD value of Bitcoin supply.

It agreed, “Long-term Bitcoin holders appear to be steadfast in their conviction.”

The accompanying chart shows Bitcoin’s HODL Waves indicator — depicting supply broken down by periods of Bitcoin dormancy.

Bitcoin HODL Waves Annotated Chart Source: Glassnode/Twitter

Whales still determine support and resistance levels

While seasoned investors shy away from the “sell” button, those with the highest volume trades are on analysts’ radar when it comes to Bitcoin spot price action.

The current trading range represents an area of ​​interest due to the extent of past trading activity involving whale funds.

Heavy buying brings extra weight to specific support prices, while the same is true for resistance levels, with BTC/USD currently sitting somewhere in between according to on-chain monitoring resource Whalemap.

“Holding 19k-18k is key for BTC,” the Whalemap team concluded last weekend.

An accompanying chart shows that the whale resistance level puts a cap on Bitcoin’s release, limiting it to the $20,000 region.

Bitcoin Whale Resistance Annotation Chart Source: Whalemap/Twitter

Nonetheless, data from research firm Santiment confirms that whales’ overall BTC exposure has fallen to a two-year low.

Bitcoin whale holdings annotated chart source: Santiment / Twitter

'Extreme fear' enters second week

As the familiar normal of 2022 returns, crypto market sentiment has been in "extreme fear" mode for more than a week.

According to the Crypto Fear & Greed Index, which measures overall crypto market sentiment, ordinary investors are uneasy about the outlook.

As of September 26, the Fear & Greed Index had a score of 21/100, with 25/100 being the boundary for "extreme fear."

Chilling is nothing new for markets this year, with the stretch of “extreme fear” being the longest ever at more than two months.

Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me

Santiment noted that social media interest rebounded over the weekend, which could be a silver lining.

“Among the top 100 crypto assets, Bitcoin is the topic of discussion with over 26% volume for the first time since mid-July,” it revealed in a portion of its Twitter comments this week.

“Our backtesting shows that discussions above 20% focused on Bitcoin is a positive for the sector.”

Bitcoin social dominance annotated chart source: Santiment/Twitter