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“Something feels like it’s about to break” – 5 things to know about Bitcoin this week

Bitcoin (BTC) starts a new week in an uncertain place and faces uncertain times – is $40,000 resistance now?

The largest cryptocurrency just closed a fourth consecutive weekly red candle, which has not happened since June 2020.

With cold feet remaining the norm over the macro market outlook, there seems little consolation as the week begins – and Bitcoin isn’t done selling off just yet.

With losses of $4,000 over the past four days alone, targets are now focused on retesting liquidity levels further towards $30,000.

It’s not all doom and gloom – longtime hodlers and key participants like miners are showing a more positive attitude when it comes to Bitcoin as an investment.

With that in mind, Cointelegraph takes a look at the forces at work shaping BTC price action in the coming days.

Worries in Asia are overtaking electoral support in France

The main external event for risk assets to start the week is the French election, which was won by incumbent Emmanuel Macron.

A sigh of relief for market participants worried about a surprise victory for far-right rival Marine Le Pen, Macron’s second term is expected to boost French equities in particular on Monday, and with them the contested euro.

The European Union, like the United States, is facing a powerful cocktail of inflation and collapsing bond markets, yet the European Central Bank (ECB) is yet to take any decisive steps to raise interest rates or expand its nearly $10 trillion balance sheet to reduce.

Bitcoin was unperturbed by the Macron win, and risk assets are already struggling with a downturn in Asia on Monday as the coronavirus shakes sentiment in China.

Hong Kong’s Hang Seng Index is down 3.5% so far on the day, while the Shanghai Composite is down 4.2%.

With the crypto crowd currently highly correlated with stock market movements, a repeated performance from Europe and the United States would provide clear directional signals.

“The concern is that the current policy support that the government has already put in place may not be effective due to Covid policies as activity is muted,” said Jenny Zeng, co-head of Asia-Pacific fixed income at global wealth management firm AllianceBernstein Bloomberg.

Even before the losses on Monday, the past week was painful for shares, as market commentator Holger Zschaepitz noted.

“Global equities shed $3.3 trillion from MKT ceiling this week as US stocks – after peaking on Thursday morning – experienced a steady decline as investors appear to reconsider why they bought risky assets in a world , which is filled with so much uncertainty,” he told Twitter user Sunday.

“Global equities valued at $107.6 trillion, which is 127% of GDP.”

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Chart of global stock market capitalization from Bloomberg. Source: Holger Zschaepitz/ Twitter

A another post pointed out that the so-called Buffett indicator — the ratio of the entire U.S. stock market valuation to GDP — was still over 100% in what he described as “problematic” territory.

Dollar strength is back with a vengeance

One component of the macro landscape that is firmly in bullish mode – much to the chagrin of crypto traders – is the US dollar.

The US Dollar Currency Index (DXY) appears to be continuing its upward trend after teetering on two-year highs last week.

At 101.61 at the time of writing, DXY is questioning its March 2020 performance when the coronavirus crash sent assets around the world into a tailspin.

Dollar strength has rarely been a boon for Bitcoin and the inverse correlation, while criticized by some, appears to be firmly under control this month.

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BTC/USD 1-week candlestick chart vs US Dollar Currency Index (DXY). Source: TradingView

“Looks like the DXY developer announced a token burn or something,” said popular trader Crypto Ed joked in response to the recent move.

For Investor’s Podcast Network host Preston Pysh, something doesn’t seem right.

“We got the BoJ to implement yield curve control as the yen collapses and we got the Fed about to hike 50 basis points as the dollar hits new highs,” he said warned Monday.

“Something feels like it’s about to break…”

The weekly chart shows the fourth red candle in a row

Bitcoin is looking anything but rosy this Monday. While the weekend managed to avoid significant volatility, the weekly close still disappointed, coming in just below last week’s levels.

However, this means that the weekly chart is now showing four straight red candles, something Bitcoin hasn’t seen since June 2020, data from Cointelegraph Markets Pro and TradingView shows.

The downtrend then continued overnight to see BTC/USD fall below $39,000, a position it is maintaining at the time of writing.

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BTC/USD 1-week candlestick chart (Bitstamp). Source: TradingView

Traders look to various charts for clues as to where the pair is headed next, but bullish premonitions are extremely rare.

For popular trader and analyst Rekt Capital, it is the Ichimoku cloud that is looming over them that would cause further losses for Bitcoin.

Meanwhile, popular analyst Cheds, author of Trading Wisdom, eyed a possible break below the 200-period moving average on the three-day chart.

That would matter, he argued over the weekend, as this was the last bear market bottom of 2018 after a bull run.

“Not a prediction, just an observation,” he said warned.

On the subject of December 2018 and its $3,100 floor, Matthew Hyland, known on Twitter as Parabolic Matt, provided further comparisons between that period and the current BTC price action.

For longer time frames, he said, holding $37,600 is now “crucial”.

“In search of that sweepdown I’ll then be on the lookout for signs of a relief rally to expect,” commented Twitter pundit Crypto Tony added Montag as part of his own analysis.

Hodlers set a new record

The “choppy” nature of bitcoin’s lower timeframe price action makes it an uninspiring trade for all but the most seasoned of players.

So it’s perhaps unsurprising that the majority of hodlers choose to stay away from it and do what they do best.

This is now being reflected in on-chain data showing that the percentage of bitcoin supply that has been dormant for at least a year has now reached an all-time high.

Citing figures from on-chain analytics firm Glassnode, economist Jan Wuestenfeld noted that this is causing the supply to generally “age” – proportionately more coins are being held longer than spent.

According to Glassnode, the supply, which has now been dormant for a year or more, has surpassed 64% for the first time on record.

HODL Waves, a glass node indicator showing hodle coins of all ages, confirms the trend. Since December 2021, the 1-2 year supply share has risen more than any other — from under 10% then to almost 15% as of this week.

The 3-5 year band of hodle coins also increased their presence in the first quarter.

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Bitcoin HODL Waves chart. Source: Unchained Capital

Fundamentals are still pointing to the moon

It’s not just casual, staunch hodlers who stubbornly refuse to reduce their BTC exposure despite the bleak outlook.

Related: Top 5 Cryptocurrencies to Watch This Week: BTC, DOT, XMR, APE, CAKE

A look at Bitcoin’s network fundamentals shows that miners are also anything but bearish when it comes to investing.

A common story this year, but an impressive nonetheless as the price moves in the opposite direction, Bitcoin’s network hash rate and difficulty will both hit new all-time highs this week.

Depending on price action, the difficulty should adjust up about 2.9% in two days, setting a new record of 29.32 trillion.

To underline the competition to participate in mining, the difficulty combines with the hash rate – an estimate of the computing power dedicated to the blockchain – which is already at its highest level ever.

Estimates vary by source, but the raw data from MiningPoolStats underscores the “only up” trend when it comes to hash rate — a key trigger, some argue, for subsequent bullish price action.

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Bitcoin hash rate chart (screenshot). Source: MiningPoolStats

The trend of rising hash rate, meanwhile, is nothing new as it has been predicted for a long time as investments continue to grow.

As Cointelegraph reported, as of early April, 20% of Bitcoin mining was done by public companies.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.