5 things for BTC on this week

Key points: 

• CPI data is coming on Dec. 13, rate hike and the Jarom Powel speech are on this week. Those facts are pointing to the increased volatility.
• Bitcoin is consolidating within the range, while traders expect the breakout.  
• The DXY is showing that the dollar is preparing to go up, which could lead BTC to drop to $15K. 
• According to the Illiquid Supply Shock Ratio metric, the probability of a shock to BTC’s primary supply is higher than at any time in nearly a decade.
• Arthur Hayes says that most of the BTC sales by miners and lenders known as centralized lending companies may have already occurred.

Bitcoin started one of the most important macro weeks of the year on a volatile sub-$17,000 level.

After last week's close, BTC/USD is showing little bullish momentum ahead of Wall Street's December 12 open.

With volatility still emerging, the biggest cryptocurrencies continue to trade in tight ranges, with analysts growing impatient with new catalysts.

They agreed that these should arrive in the next few days - US economic data due, the content and economic policy implications of which could have a significant impact on the crypto market.

Elsewhere, the precarious status quo continues — with Bitcoin miners struggling, sentiment buoyed, and traders increasingly drawing comparisons to the pits of previous bear markets.

Most important CPI print form in focus

This week everyone is talking about the Consumer Price Index (CPI) -- the leading measure of U.S. consumer price inflation.

Although it comes out every month, the latest CPI data for November, due on December 13, has additional meaning for the market. For example, the odds of a “Christmas rally” in risky assets are at stake in the two weeks before the end of the year.

It's not just the CPI report itself; the Fed's Federal Open Market Committee (FOMC) will decide on a rate hike this week, with Chairman Jerome Powell speaking and market commentators scrutinizing signs of a policy shift.

“Tuesday CPI report, Fed rate hike, Wednesday JPow speech. Stay tuned for volatility,” concluded the on-chain analysis resource material indicator over the weekend.

Popular trader MisterSpread added that during the "most (if not the most important)" week of the year, more decisions are made outside the US.

Meanwhile, trading firm QCP Capital wrote in a market update.

QCP continued:

“A higher-than-expected CPI print and more hawkish Fed have the potential to invalidate this rally, like we saw in the April and August reversals. On the other hand, another disinflationary print could see many chase a continuation of the rally into year-end.”

Whether rising or falling, the CPI tends to spark market volatility around its release, only to return to calm after Powell spoke on the rate decision.

The current consensus calls for a 50 basis point rate hike this month, according to CME Group's FedWatch tool, pointing to a pullback by the Fed at what could prove to be a major policy inflection point.

At the time of writing, the probability of 50 basis points is about 75%.

Fed target rate probabilities chart. Source: CME Group

Financial commentary resource The Kobeissi Letter called this week "the most important week of the year" but issued a warning to investors.

“Imagine how insane it would be if the Fed didn’t pivot or November CPI was higher than October’s 7.7%,” the Dec. 8 tweet read:

“This is why you don’t want a Fed controlled market.”

BTC spot price awaits action

With everyone's eyes on the Fed, traders understand that political and macro data will determine the direction of BTC/USD in the coming days.

Barring force majeure, you may have no choice but to sit back and wait for the data to arrive.

Meanwhile, data from TradingView shows that BTC/USD continues to trade in the very familiar zone of around $17,000.

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

Flat for several days in a row, the pair appears to have no direction as the dust from the FTX implosion continues to settle.

“Since June, BTC has been oscillating between realized price (green) and equilibrium price (yellow),” analytics resource On-Chain College summed up the medium-term trend:

“I’m interested in a sustained movement outside of this range, which has yet to occur.”

BTC/USD “Bear market levels” chart. Source: On-Chain College/ Twitter

Some are more explicit about BTC’s price action. Matthew Dixon, founder, and CEO of cryptocurrency rating platform Evai, urged Bitcoin to "complete a higher overall correction" to erase most of FTX's losses.

BTC/USD annotated chart. Source: Profit Blue/ Twitter

Meanwhile, popular commentator Profit Blue claims that $10,000 will reappear before early 2023.

“Bitcoin price will hit $10,000 and may bottom soon. Pay attention to the details,” reads an accompanying chat comment.

BTC/USD annotated chart. Source: Profit Blue/ Twitter

Dollar teases new strength

Meanwhile, trader Bluntz, who expects a trend reversal in the U.S. dollar, warned that Bitcoin could still be in bearish territory by the end of the year.

The U.S. dollar index (DXY), which has been under pressure for weeks, has begun to seal higher intraday lows, potentially creating dollar strength for a rally.

This can spell trouble for the entire crypto market due to the inverse correlation.

Bluntz wrote in a Twitter update for the day: "Very ugly 4-hour end, looks like lower highs on the 4-hour time frame, lots of catalysts ahead this week:"

“dxy also putting in a higher low on daily and looking strong. my gut is telling me we're en route to a new low sub 15k for btc which i will happily buy.”

A previous article on December 5 called for the $15,000 region in the first quarter of next year.

At the same time, his colleague Dr. Proffit pointed out that as of June, the US dollar index has returned to the key "breakout zone", so short-term clues are crucial to the trend.

“DXY successfully retested its outburst for the first time in June,” he said last week:

“The mother of all decisions is coming, expect huge volatility next week. The incoming DXY move will decide the fate of the crypto and stock market.”

DXY has yet to reclaim its 200-day moving average (MA). However, their losses have recently been described as a "lights out" for the dollar.

U.S. dollar index (DXY) 1-day candle chart with 200 MA. Source: TradingView

Supply shock near 10-year high

Behind the scenes, Bitcoin has provided subtle hints that all is well in terms of overall network strength.

According to the Illiquid Supply Shock Ratio (ISSR) metric, the probability of a shock to BTC’s primary supply is higher than at any time in nearly a decade.

Developed by statistician Willy Woo and crypto researcher William Clemente, ISSR “attempts to model the likelihood of a supply shock forming,” explained on-chain analytics firm Glassnode.

In short, it assesses the relationship between available supply and current demand, and given the ongoing trend of moving BTC to cold storage, the signal is clear.

On Dec. 10, the ISSR was 3.537, the highest since August 2014.

Bitcoin Illiquid Supply Shock Ratio (ISSR) chart. Source: Glassnode

Hayes says the Bitcoin miner sale "is over"

Bitcoin mining research by former BitMEX CEO Arthur Hayes offers a last hope for the future.

In his latest blog post, published on Dec. 9, Hayes, known as an industry commentator, took issue with common narratives about the mining financial boom and its impact on markets.

As reported, increased BTC selling by miners struggling to make ends meet raised concerns that a major capitulation event could flood the market with liquidity.

That’s not the case, Hayes said, further showing that “even if miners sell all the bitcoin they produce every day, it would have very little impact on the market.”

"Therefore, we can ignore this persistent selling pressure as it is easily absorbed by the market," he noted.

Hayes went on to say that most of the BTC sales by miners and lenders known as centralized lending companies (CELs) may have already occurred.

“I believe the forced sale of bitcoin by CEL and miners is over. If you had to sell you would have done so already,” he wrote:

“There is no reason why you would hold on if you had an urgent need for fiat to remain a going concern. Given that almost every major CEL has either ceased withdrawals (pointing to insolvency at best) or gone bankrupt, there are no more miner loans or collateral to be liquidated.”

Meanwhile, data from Glassnode shows that the 30-day change in miner supply, while still falling, is cooling off from recent highs, supporting the theory of slowing sales.

Responding to Hayes’ article, Bitcoin mining analyst Jaran Mellerud added: “Fears that distressed bitcoin miners are creating selling pressure are being amplified.”

Bitcoin miner net position change chart. Source: Glassnode