For BTC, Are China Stocks Boom Bullish? Five Things to Consider This week

Suzat

July 6, 2020 2:32 pm

For BTC, Are China Stocks Boom Bullish?
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A turbulent mixture of macro, coupled with expectations of a big move in Bitcoin, could spell an interesting week for traders and holders alike. Bitcoin (BTC) begins a new week testing increasingly weak $9,000 support, but factors could make or break price-performance, traders should focus on five main factors in Bitcoin for the coming five days.

Stocks Continue To Grow 

On Monday, Stock market futures showed a mixed but overall stronger mood. Data, prominently last week’s data was notably better-than-expected United States employment figures, helped to buoy the mood.

Stocks continue to grow, with Chinese stocks rising, despite the fast increasing spread of COVID-19. China’s FTSE A50 index hit all-time highs on the day. Considering that issue against economic data is a key balancing act for the market, and its volatility is set to reflect in Bitcoin’s moves.

“FTSE China A50 Index at new ATHs, surpassing 2015 mania levels. As a proxy for risk sentiment in China, this could bode well for crypto.” 

crypto lender Amber Group Tweeted.

At press time, since July 2, BTC/USD had just hit $9,200, having plunged below $9,000 late Sunday. 

Bitcoin vs. S&P 500 three-month chart. Source: Skew

Bitcoin’s correlation with macro may yet generate more pain than gain for investors. The unusual “recovery” of stocks comes among mass interventions in the markets by central banks. Charts displaying the market performance of last week denominated in Bitcoin and gold highlighted just how unstable current conditions really are. 

China stomps on financial privacy

As Bloomberg explained, China imposed a program to keep large transactions in check among increased concerns over the state of its financial system as bad debt balloons in the wake of the coronavirus outbreak.

The pilot program will ultimately affect 70 million people, who will all be required to pre-report transactions worth over 500,000 yuan ($71,000), be they retail or business clients.

The issue of bad debt, which has surged in China in the wake of coronavirus and is now causing extreme headaches for smaller domestic banks. Chinese residents are officially banned from trading Bitcoin, but over-the-counter (OTC) activities remain, with the true size of the underground market a matter of debate. Lately, one mining pool located in China marked its second-biggest outflow in history, leading to suggestions that the BTC may end up in an OTC sell-off.

Meanwhile, the failure over Hong Kong and its new security law has so far failed to influence Bitcoin in the way that last year’s riots did. At the time, Bitcoin as a safe shelter narrative took centre stage as cash supplies diminished and the Hong Kong dollar slipped precipitously amid the unrest.

Bitcoin fundamentals shoot higher

Having stayed quite static at the last adjustment, Bitcoin network difficulty is once again set for a healthy uptrend next week. Non-technically, the difficulty is a representation of miner participation in the BTC network. Due to the factors affecting their activity, including its price, its value goes up and down.

Every two weeks Adjustments takes place, which is an important part of BTC’s ability to regulate itself as a system — despite price action or otherwise.

In the time of around seven days, the difficulty will increase by an estimated 6%, implying demand is in place to make processing Bitcoin transactions more intense in terms of computing power. The former adjustment was 0%, a rare occurrence, while before that, difficulty surged by 15%, its highest single upward move in the past two years.

Bitcoin 7-day average difficulty six-month chart. Source: Blockchain

Meanwhile, the hash rate, an estimate of the computing power already dedicated to mining, knocked highs of above 120 EH/s this weekend, data from Blockchain suggests. In the past two weeks, the Hash rate has increased by 10%. 

Futures “mini gap” provides little inspiration

Those expecting that a gap in Bitcoin futures markets might drive price performance to a certain level will be disappointed this week. Low volatility over the weekend indicates that the difference between last week’s trading close and this week’s open is practically fictitious, just $20.

Bitcoin tends to “fill” gaps left in futures immediately. As published, it was only a matter of days before even a huge $1,000 void was cancelled out by profits earlier this year. However, the $20 gap at $9,100 is already filled, for the coming week.

CME Bitcoin futures 30-minute chart with gaps. Source: TradingView

Overall, despite the derivatives markets form an increasingly critical focus for Bitcoin analysts, given that they are liable for the lion’s share of the trading volume.

The volume will speak “heavy” Bitcoin breakout or breakdown

Markets analysts believe that the most important thing for BTC is to hold not even $9,000, but lower for a Short Term.

Last week, Michaël van de Poppe revealed in a summary, that $8,600 was the target to protect, and failure to do so would trigger a “heavy breakdown.” Likewise, Van de Poppe said, there is potential for a breakout above $10,500, itself a key resistance level. It all depends on volume. He communicated, comparing the 2019 bull run and current conditions.

“During the range-bound period of 2019, the volume drained away over time. The actual climax of the volume came with the breakout, which meant that breakout traders hit their limit buys and shorters hit their stop/loss, this chain reaction triggered a sudden $1,000 candle.”

Volume drops have brought the return of lower exchange reserves as traders seem prepared to hold and not to sell for the near term.

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