US Inflation Data Will Cause 'Chaos' - 5 Things to Know About Bitcoin This Week

Bitcoin started the new week with a shaky position near $20K ahead of fresh macro turmoil.

The largest cryptocurrency is struggling to hold on to its recent recovery after posting its biggest weekly gain since March.

The main resistance zone remains above and inflation data due later this week could unnerve all risk assets in the coming days.

Meanwhile, crypto market sentiment is showing signs of recovery, with on-chain indicators continuing to highlight where Bitcoin’s latest macro price bottom is.

With conflicting data everywhere, Cointelegraph takes a deeper look at potential market volatility factors for the week ahead.

The 200-week moving average is a headache

At around $20,850, the weekly close on June 10 was hardly anything special for BTC/USD, but the pair still posted its best seven-day gain in months.

At market close on Sunday, bitcoin was a full $1,600 higher than it was at the start of last week, making progress not seen since March.

However, that success didn't last long, with prices turning lower in the hours after the week's close. According to data from Cointelegraph Markets Pro and TradingView, BTC/USD has a price target of $20,400 as of this writing.

BTC/USD 1-hour candle chart (Bitstamp) Source: TradingView

Whether bitcoin can hold its current levels could be key to determining market sentiment this summer, as the relief in global stock markets will provide the cryptocurrency with a chance to erase some of the losses it has suffered in recent months.

Commentators, including trading suite Decentrader, are therefore watching the weekly chart with interest.

Others were less enthusiastic, noting that BTC/USD is still closing below the important 200-week moving average (WMA) near $22,500 again.

In previous bear markets, the 200 WMA acted as a prevalent support level below which Bitcoin briefly hovered, entering a macro bottom. However, this time seems to be different, $22,500 has not been on the charts for a month.

Meanwhile, popular trader TechDev advocates a more optimistic outlook for the remainder of 2022.

He said over the weekend that by the end of the year, reclaiming more significant WMAs should lead to a complete end to Bitcoin's "re-accumulation phase."

TechDev told Twitter followers: “Bitcoin rally to 32-35K may confirm re-accumulation and end of correction this year.”

“In my opinion, this is most likely to happen when both the 100-week EMA and the 50-week EMA are in this range. The 100-week EMA is currently at 34.8K and the 50-week EMA is at 37.2K.”

Elsewhere, ongoing asset liquidations at struggling cryptocurrency lending platform Celsius added to selling pressure.

Dollar returns in strength as Asian markets tumble

On July 11, Asian stock markets showed a downward trend.

At press time, the Shanghai Composite was down 1.5%, while Hong Kong’s Hang Seng was down 3.1%.

European stocks fared slightly better, with the FTSE 100 and Germany's DAX posting slight gains, while U.S. markets were yet to open.

However, the U.S. dollar index (DXY) was already moving sharply higher ahead of the U.S. stock market’s return, offsetting the pullback as of last week.

On July 11, the U.S. dollar index was at 107.4, only 0.4 points lower than the 20-year high set in the previous few days.

Analyzing the situation, an analyst at trading firm The Rock said the U.S. dollar index is "almost the most extreme" in terms of year-to-date growth.

“Based on the extreme rally so far this year, the U.S. dollar index is now up 16% year-over-year,” he wrote.

"It's about the most extreme scenario in history, and unfortunately it usually happens when there's significant financial stress in the market, a recession, or both."

Last week, Bitcoin managed to break the traditional negative correlation with the U.S. dollar index, rising in tandem with the U.S. dollar index.

US Dollar Index (DXY) 1-day candlestick source: TradingView

Inflation set for 'chaotic week'

If that wasn't enough, the age-old topic of inflation could further test the market's resilience this week.

The U.S. consumer price index (CPI) for June will be released on July 13 and is expected to be higher than a year earlier.

The higher the inflation rate, the more it deviates from those already high expectations, and the more risky assets tend to respond when policymakers are expected to respond.

According to macro analyst Alex Krueger, the likely move this week is clear.

"It will be chaotic," he concluded on Twitter.

Excluding many leading inflation indicators, the CPI even caught the attention of mainstream commentators at the end of last week, a grim sign that this week's data could be confusing.

Economist Mohamed El-Erian responded: "With U.S. CPI inflation numbers likely to come very close to 9% next week, some will be quick to point out that this is a lagging measure."

"Yes ... but it captures the pain that many people are feeling, especially the less fortunate in society; and affects inflation expectations."

In the meantime, any knee-jerk reaction could, like other risk assets, spook the Bitcoin market, or at least trigger major volatility, as seen in previous CPI events.

MACD suggests a price bottom is forming

With multiple bitcoin price indicators either showing a “bottom” or even hitting an all-time low, there are several signals that investing in bitcoin at current prices has a historically unrivaled risk/reward ratio.

The latest indicator to join this week is the exponentially smoothed moving average (MACD) on the weekly chart.

The MACD effectively tracks a chart trend that is already in progress. It subtracts the 26-day exponential moving average from the 12-day exponential moving average (EMA).

When the resulting value is below zero, Bitcoin tends to be at a bottom, which means that if history repeats itself, so might the recent trip to $17,600.

Commentator Matthew Hyland also pointed out that a similar MACD structure is still playing out on the 3-day chart.

"The 3-day MACD is still on a bullish cross," added market analyst Kevin Svenson.

"Despite the pullback, I remain bullish on the medium-term outlook."

Cointelegraph reports that Bitcoin’s Relative Strength Index (RSI) is already at its most “oversold” level in history.

Meanwhile, a trader last week called July 15 a key date for another chart feature showing a bottom, made up of two separate moving averages.

Crypto Fear and Greed Index Hits Two-Month High

There is a silver lining in the latest data showing that confidence among ordinary cryptocurrency investors is slowly returning.

On a previous basis, crypto market sentiment hit its highest level since early May over the weekend and is currently at 22/100.

While still in the "Extreme Fear" zone, the resurgence of the Crypto Fear and Greed Index stands in stark contrast to the events of the past two months, when it fell as low as 8/100, even lower than the previous Some bear market bottoms.

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