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Bitcoin: Fundamental Developments and Market Opinions
As we wrap up the month of May, Bitcoin's fundamental indicators are making a strong statement, though investor sentiment about BTC's price performance remains mixed. Bitcoin kicks off the week on a brighter note, with a positive shift noticed after the weekly candle close.
Bitcoin, the digital giant, is finally waking up after several dives to a two-month low, having been caught in a tight trading channel. Despite market volatility being back on the agenda, investors are still divided. Could short-term bullishness translate into a larger upward trend?
The winding down of May heralds an important macroeconomic event: the resolution of the United States' debt ceiling. The anticipation of an agreement to lift the ceiling, thereby dodging a U.S. government default, could give all risk assets, including Bitcoin, a sigh of relief. But with the stock markets remaining closed till May 30th, Bitcoin investors must play the waiting game.
The U.S. Debt Ceiling Deal Impact on Bitcoin
Despite the time-zone difference, Bitcoin, the always-available cryptocurrency, finds an optimistic spark in the debt ceiling decision, though it may not have significant implications for larger macroeconomic policies. So, what comes next in the cryptocurrency world?
After weeks of bipartisan discussions, the Biden administration has put forth a proposal to tackle the U.S. debt ceiling conundrum and has presented it to Congress. Although the fate of the proposal remains uncertain, anticipatory positions are being taken.
University of Pennsylvania finance professor Jeremy Siegel told CNBC that he believes the passage of the proposal is almost a certainty, echoing a common belief. While some argue that a catastrophic outcome is unlikely and that a standstill at this juncture doesn't immediately expose the U.S. to default risk, uncertainty still looms as the proposal navigates the Congressional process.
Bitcoin Price Movements and the Market Response
News about the debt deal seemed to have an immediate revitalizing effect on the lukewarm BTC/USD pair, which experienced a familiar end-of-week volatility spike, momentarily reaching $28,450. The pair, currently just below $28,000, appears to have enhanced its outlook in spite of intraweek trend concerns.
Future Prospects: Bitcoin Mining Difficulty and Hodl Trends
From a fundamental perspective, Bitcoin is painting a bullish picture. On May 31st, Bitcoin's mining difficulty is predicted to increase by 2.5%, surpassing the 50 trillion mark for the first time, as per BTC.com data. Add to that the near-record high hash rate, and it's evident how committed and competitive miners are.
Bitcoin's Hodl trend also remains in an unwavering "up only" mode. Less Bitcoin is up for grabs, as committed buyers push Glassnode’s "Hodled and Lost Coins" metric to multiyear highs. With more than 47 million Bitcoin wallets now holding a non-zero balance, the demand for Bitcoin remains strong.
As we watch the developments in the Bitcoin market, remember that price trends depend heavily on short-term holders' actions. As May draws to a close, let's keep an eye on the Bitcoin market to understand better what the future holds for the largest cryptocurrency.
Miners Return to Holding Strategy
Glassnode, an analytics firm, observed last week that miners are once again opting to hold, thereby expanding their total BTC balances by retaining more BTC profits than they liquidate. "Following a significant Bitcoin outflow in the wake of the FTX meltdown, Miners (excluding Patoshi and early unlabelled Miners) have bolstered their balance sheet by +8.2K BTC, increasing their holdings to a total of 78.5K BTC," they reported, accompanied by a chart.
Hash Rate vs Spot Price: A Historical Comparison
Reflexivity Research's head of crypto research, William Clemente, made an interesting comparison between the current hash rate trend versus the spot price and Bitcoin's 2019 price recovery. As Cointelegraph often highlights, some long-term market observers maintain the belief that the spot price tends to follow the hash rate over extended periods.
The Resolute 'Hodl' Trend
The "Hodl" trend among Bitcoin investors remains robust, with long-term investors consistently choosing to hoard their coins rather than sell. This commitment to holding Bitcoin has led to a shrinking BTC pool for buying, pushing Glassnode’s “Hodled and Lost Coins” metric to levels not seen in years.
At 7,725,079 BTC, the volume of "Hodled and Lost Coins" is larger than any time since May 2018. It's worth noting that the price trends of Bitcoin are increasingly dependent on the behavior of short-term holders, generally associated with speculative trading activities.
The Key Support Zone
These short-term investors, who've held onto their BTC for 155 days or less, have an average purchase cost of $26,500. This makes it an important, and so far resilient, support level. Furthermore, the number of Bitcoin wallets holding some BTC has hit a record high, exceeding 47 million.
MACD Crossover Signals Potential for Substantial Gains
An intriguing signal that has previously indicated the onset of a bull market in 2023 has resurfaced. The moving average convergence divergence (MACD), a bullish crossover event that was twice followed by at least a 40% surge this year, has just occurred once again.
This development was highlighted by well-known trader Captain Faibik, who verified the occurrence on May 27. The MACD subtracts the 26-period exponential moving average (EMA) from the 12-period EMA, and a nine-day EMA of the result creates a "signal line". This line, when juxtaposed with the MACD value, offers an indication of Bitcoin's potential tops and bottoms.
