5 things for BTC on this week

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Key points:

• Traders have reason to believe that short-term strength could continue, taking Bitcoin closer to $20,000, suggesting that as a final move up before bottoming out. 
• The SPX gained 1.66% last week to 4,071, while the market and traders are waiting for CPI and PPI data in a matter of a week. 
• “Bitcoin miners had gone bankrupt in previous cycles before things got better. We're in the middle of a giant Bitcoin mining capitulation now” - Satoshi Stacker.
• The mining difficulty will drop by about 7.8%, the upcoming difficulty drop will be Bitcoin’s biggest drop since July 2021, when it fell more than 27% in a correction.
• Realized and unrealized losses in BTC supply are reaching unprecedented levels, with the overall supply showing a net loss according to the MVRV metric, pointing out the start of the accumulation zone. 

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Bitcoin started the first full week of December at a three-week high as bulls and bears continue to battle.

After closing the week just above $17,000, BTC/USD appears determined to make the most of stocks and a weaker dollar.

As the U.S. gears up for the release of November inflation data, the U.S. dollar appears to be a key point to watch as BTC price action heralds a rebound from the pit of the FTX crash.

All may not be as simple as it seems - data shows that miners are facing serious difficulties, and views are far from unanimous about the stock's ability to keep climbing.

Will Bitcoin experience a "Christmas rally" at the end of the year or face fresh losses in the new year?

We present five areas to watch for BTC/USD performance in the coming days.

Bitcoin Traders Clash Over 'Santa Claus Rally'

Bitcoin bulls eased slightly this week, showing a solid weekly close before returning to a multi-week high.

BTC/USD touched $17,418 on Bitstamp in the hours after the market closed, taking the pair to its highest level since Nov. 11, according to TradingView.

Traders have reason to believe that short-term strength could continue, taking Bitcoin closer to $20,000.

“No change to my expectations. Still looking for 19k+,” Credible Crypto confirmed to Twitter followers on Dec. 4.

“$BTC has formed a nice tight consolidation here after a clean impulse on low time frame. May dip into 16k's first to take out these built up lows but still expecting continuation up after regardless.”

Meanwhile, trading colleague Dave the Wave is confident of an upcoming Christmas rally, while others, including popular commentator Mustache, say the timing of the rally is historically correct.

Comparing the 2022 bear market to previous ones, he explained that BTC/USD should now bottom 31 weeks after its last all-time high.

"The Bitcoin bottom should be very close," he reiterated over the weekend.

But not everyone is so optimistic. The Crypto Kingpin has room to go as high as $18,000 before Bitcoin starts “moving lower.”

While he didn't mention a specific downside target, he did describe the weekly close as "contradictory."

"I'm still of the belief for now that this move up on BTC is part of a corrective ABC w4 before making a new low sub $15k into Q1 2023 where we find a longer-term bottom," Bluntz, another popular trader, said after the weekly close.

Trader Korinek_Trades is similarly conservative on the shorter time frames, acknowledging that downside could be as low as $12,000, although he called for a “big bounce” in Bitcoin.

Cryptos Cautious Against Stocks Amid 'Impending' Crash Claims

The upcoming macro week marks the precursor to the all-important US November consumer price index (CPI), due on December 13.

Meanwhile, U.S. producer price index (PPI) and unemployment data later in the week will be data traders will be watching as they traditionally spark at least short-term volatility.

Looking at the U.S. stock market, the tone of cryptocurrency traders and others appeared nervous despite the recent fall in the dollar.

The S&P 500 (SPX) gained 1.66% last week to 4,071.

“Unless we take out 4,300 on volume and stay above, this to me is a propped-up rally. Could take a few weeks to climb mind,” Crypto Tony warned over the weekend.

Another tweet revealed skepticism about Bitcoin avoiding a knock-on effect, even though the share price has lagged significantly after FTX.

“This is a very plausible scenario,” Crypto Tony commented alongside the chart.

“If we do indeed see a continuation crash in the stock market due to high interest, defaults etc, I expect Bitcoin to follow. Until then we will simply range in my opinion while there are minimal buyers.”

The sentiment echoes predictions from popular commentator Nunya Bizniz, who previously suggested the SPX could stage a "Christmas rally" before reversing.

The most pronounced outlook on stocks comes from Michael A. Gayed, noted portfolio manager and author of the investment strategy circular "Lead-Lag Report."

In a lengthy Twitter summary on Dec. 3, Gade went beyond caution, telling readers that an "imminent stock market crash" was next.

“My point is that there is a lag and markets have an interesting way of suddenly overwhelming crowds,” read part of a post.

“It is not impossible to see a scenario where the butterfly creates the hurricane.”

He added that FTX itself has sparked unusual market reactions, even beyond cryptocurrencies.

Miners feel a "giant capitulation" 

The FTX saga is increasingly evident in the struggles of Bitcoin miners.

The latest data shows that the 30-day change in the supply of BTC in miners’ wallets is the most negative since early 2021.

The numbers from the on-chain analytics firm Glassnode come in the form of an indicator of changes in miners’ net positions. On Dec. 3, miners lost a total of 17,721 BTC over a 30-day period.

Other data confirm that the total BTC balance of miners dropped sharply again in early December, from 1,828,630 BTC on November 30 to 1,818,303 BTC on December 3.

The last time miner balances were this low was September 2021.

With BTC/USD down 16% in November, miners are suddenly finding their already tight margins past the point of no return.

Commentators argue that when they pull the plug, it means "surrender," and that we are now in a period of change.

“November is a bad time for BTC miners,” concluded famous analyst Satoshi Stacker.

“Bitcoin miners had gone bankrupt in previous cycles before things got better. We're in the middle of a giant Bitcoin mining capitulation now.”

An accompanying list of public miners’ dismal financial performance supports this theory.

As reported, Bitcoin’s Hash Ribbons indicator is already pointing towards an impending capitulation phase, with its two moving averages crossing just a few months after miners pulled out of their last capitulation.

Difficulty sees the biggest drop in 17 months

As Bitcoin miners come under pressure, network fundamentals are starting to reflect changes in activity.

According to BTC.com, with the next automatic rebalance on December 6, the mining difficulty will drop by about 7.8%.

In the weeks following the FTX crash, there have been strange shifts in network participation, with analysts citing various reasons why fundamentals have diverged from price action.

According to reports, one theory even suggests that Russia is monopolizing the market by adding massive amounts of hashing power, although miners generally believe that profitability has declined significantly.

While the hash rate was still increasing after FTX and the subsequent BTC price drop, things started to change at the end of November. The hash rate has fallen from near all-time highs and is struggling as a result.

In fact, the upcoming difficulty drop will be Bitcoin’s biggest drop since July 2021, when it fell more than 27% in a correction.

Meanwhile, Timothy Peterson, investment manager at Cane Island Alternative Advisors, even has reason to believe that difficulty might rule out a macro BTC price bottom.

In a Nov. 29 tweet, he argued that the convergence of BTC/USD’s 200-day moving average and its “difficulty value” (a difficulty-derived BTC price value) has historically indicated a bottom.

“A bitcoin buy signal is within sight. Caveat: based on historical relationships which may no longer hold,” he commented.

“Still, I think difficulty is a good indicator of a minimum level of demand for bitcoin. The convergence is at 12k, which means price must be +/- 12k for 200 days.”

As the attached chart shows, this formation will not occur until mid-2023.

Emotional avoidance of 'extreme fear'

The sentiment is also avoiding volatility as Bitcoin price action avoids more macro lows.

Everyone’s favorite sentiment indicator, the Crypto Fear & Greed Index, remains pegged to a range above the “Extreme Fear” zone.

After falling in line with the price after FTX, a modest recovery is underway despite a widespread belief that new lows are imminent.

The strange discrepancy predicted by many commentators is compounded by the "real" circumstances of the investors themselves.

As reported, realized and unrealized losses in BTC supply are reaching unprecedented levels, with the overall supply showing a net loss according to the Market Value Versus Realized Value (MVRV) metric.

MVRV compares Bitcoin’s market cap to its realized market cap — the total price at which the supply last changed. If the latter crosses under the former, it indicates a price structure.

Popular commentator CryptoNoob described these structures as “accumulation zones” and said current conditions may even offer Bitcoin a “lifetime investment opportunity.”