Thanks to oil production cuts and major historical resistance, among other factors, Bitcoin bulls have their work cut out to break higher.
Bitcoin (BTC) starts a new week in volatile territory, with news of an oil supply cut delivering a choppy start.
Still caught at major historical resistance, BTC/USD delivered an unappetizing weekly close on news of oil production cuts.
A subsequent rebound may show bulls’ mettle, but the question for analysts is what happens next. Will oil prices dictate market moves or can Bitcoin break through $30,000?
Under the hood, the picture is as rosy as ever, with network fundamentals due to hit new all-time highs this week while dormant supply is also increasing.
Cointelegraph looks at Bitcoin markets as the world digests the latest move from The Organization of the Petroleum Exporting Countries plus 10 other oil-exporting countries (Opec+).
Oil cut boosts dollar as inflation concerns return
A key event over the weekend, which is now upending macro conditions, is a decision to cut global oil output.
Opec+ has announced voluntary cuts in production totaling 1.65 million barrels per day, and the impact was felt immediately, with the U.S. dollar rising alongside energy costs.
A classic headwind for risk assets, including crypto, the U.S. Dollar Index (DXY) traded above 102.7 at the time of writing, up from April lows of 102.04.
“Eyes on DXY this morning.... This bounce could be just a gap fill as I spoke about last week. I was waiting for this fill,” popular trader Crypto Ed reacted, uploading an explanatory chart to Twitter.
“It’s time for DXY to show its direction (which should effect BTC’s PA).”
While the Opec+ move took its toll on assets from Bitcoin to gold, Alasdair Macleod, head of research for Goldmoney, argued that governments would have to inject liquidity to offset any energy price rises, thus once again boosting risk-asset performance.
WTI oil is up $3.60 this on ME and Asia cutting output. Market reaction is gold falls $13. Markets incorrectly believing it's "deflationary". But anyone with half a brain knows that central banks will just print faster and faster to pay for higher energy prices...
— Alasdair Macleod (@MacleodFinance) April 3, 2023
“Markets will soon react to the surprise OPEC production cut from this weekend,” financial commentary resource The Kobeissi Letter continued in its own dedicated analysis.
“Oil prices will likely rise back above $80.00, an unwelcomed development by central banks attempting to fight inflation. Supply-side inflation is set to worsen on this news.”
Higher inflation would, in turn, increase the odds of central banks continuing to hike interest rates despite the ongoing banking crisis in the U.S. and abroad.
According to the latest estimates from CME Group’s FedWatch Tool, markets currently believe that the Federal Reserve will hike rates by another 0.25% in May, having previously been more in favor of a pause.
Bitcoin price rebounds from Opec+ news
Bitcoin initially felt the pressure from the Opec+ decision as the weekend faded, dropping below $28,000 to close the week in a disappointing style.
However, during the April 3 Asia trading session, BTC/USD staged a sudden comeback, jumping $865 from the overnight lows of $27,600 on Bitstamp.
Popular trading account Daan Crypto Trades noted that in so doing, Bitcoin had closed another CME futures gap and thus exhibited classic Monday trading behavior.
$BTC With the quick CME gap close on Monday as we see so often. pic.twitter.com/KKbnsrucvW
— Daan Crypto Trades (@DaanCrypto) April 3, 2023
Fellow analytics account Skew followed short-term developments while predicting a “much bigger reaction” during the coming week.
$BTC nice 4H Close
— Skew Δ (@52kskew) April 3, 2023
Bouncing so far, target would be $29K highs for a sweep at very least.
Pretty low volume so far though, expecting a much bigger reaction this week https://t.co/xCCoUqjNvR pic.twitter.com/gU3RSzUiut
Looking ahead, however, crypto analysis and education resource IncomeSharks maintained a bearish outlook on BTC.
“I just can’t unsee the double top Mcdonalds pattern,” it wrote on the day, referring to the structure of BTC/USD in 2023 so far.
“Now you got a diagonal trendline break, low volume, and weak OBV. Logic and unbiased emotions says to sell/short this, I don’t see a reason to be bullish short term YET.”
Trader and analyst Rekt Capital was not so sure.
“Still not clear if BTC is forming the second part of its Double Top formation,” he argued in his latest analysis.
“$BTC would need to soon drop to ~$27,000 (blue) if it is to fully develop the pattern pattern & form an M-like shape. Lose ~$27K -> Double Top validated. Something to consider.”
Another week, another Bitcoin mining record
Dip or no dip, Bitcoin network fundamentals are in no mood to flip bearish this week.
According to the latest estimates from BTC.com, Bitcoin difficulty is due to have yet another increase at the upcoming automated readjustment in three days.
This will take it to 47.92 trillion on a 2.3% rise, marking new all-time highs for difficulty.
Data from MiningPoolStats shows a similar uptrend for hash rate, which by some measurements touched a record 400 exahashes per second (EH/s) recently.
Analyzing what could be behind the rapid growth, Sam Wouters, a research analyst at mining firm River, suggested that it was likely sidelined rigs returning to operations thanks to price rises.
“It is rumored that several large public miners have significant inventories of unused ASICs. While Bitcoin’s price was so low and as much inventory as possible was brought online last year, at some point maximum capacity of what the network could handle was reached,” he wrote in part of a dedicated Twitter thread on March 27.
“Now that the price has been rising again and some time has passed, more of this inventory has been able to go online.”
Data from on-chain analytics firm Glassnode shows that miners have begun attempting to retain more BTC than they earn.
On a rolling 30-day basis, miners’ net position change is again positive after two weeks of a downtrend.
Dormant BTC supply sets further records
Bitcoin is known for its ability to create supply shocks, but the latest data underscores the long-term trend.
Despite the BTC price comeback this year, the available supply dormant for a decade or more is at new all-time highs.
That record was beaten again this week, with 2,691,418.953 BTC not leaving wallets since at least April 2013.
This equates to 12.81% of the total possible supply of 21 million BTC, or 13.91% of the supply mined so far.
Any mass interest in BTC will thus mean that buyers have a dwindling supply to purchase. While rising slightly in 2023, exchange balances remain near their lowest since early 2018, Glassnode confirms.
“Too euphoric?”
Crypto market sentiment has not yet digested the possibility of a significant retracement.
Related: Bitcoin liquidity drops to 10-month low amid US bank run
According to the classic sentiment indicator, the Crypto Fear & Greed Index, “greed” is what continues to characterize the overall mood.
As of April 3, greed measured 63/100, near its highest since Bitcoin’s all-time highs in November 2021.
“The crypto market is getting too euphoric,” analytics resource Game of Trades warned late last month.
While high, the level of greed, as depicted by the Index, still has considerable room for growth until hitting “extreme” territory nearer 90 — this being a classic signal that a significant market correction is due.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
