The Bitcoin price broke past its 200-week moving average in mid-July but failed to pick up considerable bullish momentum. The lackluster price action was especially troubling last week as the stock market posted gains while the crypto was relatively quiet. It indicates a weakening correlation between the stock and crypto market.

Negative catalysts such as the intensification of geopolitical tension between China and the U.S. on the Taiwan front emerged, which threatened a global asset price shock.

The report of solid growth in the American job sector in July also threatened a drop. Considering the recent trend of “bad news is good news,” the opposite is also true. A strong jobs market would allow the Federal Reserve to continue imposing aggressive rate hikes, which is terrible for the markets.

Besides the above macroeconomic concerns, the crypto industry suffered two major hacks last week in Solana and the Nomad cross-chain bridge, adversely affecting buyer sentiments. Still, the price showed resilience to the negative catalysts and held above $22,000 along with several key indicators. 

Moreover, it wasn’t all grim as Coinbase announced that it has partnered with BlackRock to give the world’s biggest asset manager’s clients access to Bitcoin. The consortium of energy exporters in the OPEC also agreed to a slight increase in production, which eased inflation worries by causing a drop in crude oil prices.

The favorable macroeconomic climate, recovery above key technical levels, and on-chain movements indicate a bullish momentum. My only concern is the time Bitcoin is taking to rally.

Stock Market Correlation Watch

The correlation between the Nasdaq-100 index and the Bitcoin price weakened last week, which was strange as not much has changed fundamentally. While the Nasdaq-100 index posted an increase of 1.95% on a weekly scale, the BTC price, which usually moves in the same direction as Nasdaq-100 but with higher volatility, lost 0.58%.

Correlation coefficient between Bitcoin and Nasdaq-100 weakened last week. Source: Trading View

A possible implication of the delayed reaction in Bitcoin could be caution among traders and investors about investing in crypto, which is why it is having a late reaction and has yet to play catch up.

The global financial markets are potentially coming out of a bear market, and while the Nasdaq-100 index looks technically and fundamentally, Bitcoin and the crypto market have a higher volatility risk. Currently, momentum stocks in the Nasdaq-100 index look more attractive after their respective Q2 earnings reports did not emerge as worse as the market feared.

Bitcoin and the crypto market could rise and catch up with the Nasdaq. However, intensifying inflation worries in the Consumer Price Inflation (CPI) print on Wednesday could derail the stock market uptrend and inflict greater harm to Bitcoin and the crypto market.

Inflation Watch

There has been a lot of speculation around an inflation slowdown in July. Interestingly, Elon Musk, Tesla’s CEO, noted that he thinks the U.S. economy is past “peak inflation.”

Musk is obviously a very well-informed man, and Tesla purchases a significant amount of commodities for its vehicle parts. I think his comments may have some merit. If he is correct, and the U.S. CPI price is lower than this year’s peak of 9.1%, Bitcoin could begin its ascent towards the $26,000 area.

On the flip-side, if inflation comes in hotter-than-anticipated, the chances of a 75 basis point rate hike in the subsequent Fed policy meetings increase dramatically. This outcome would be bearish for stock and the crypto markets, especially given last week’s positive job numbers.

Economic calendar for this week. Source: Forexlive

Spot Exchange Accumulation

Bitcoin surpassed its realized price (currently $23,170), which instills confidence about the continued uptrend from a generational bottom. The metric represents the actual money invested in BTC by calculating the price at which a transaction is sent. Similar to the 200-week moving average, this indicator has been an accurate bottom indicator in the past.

The on-chain movement of Bitcoin to and from exchanges is also inclined towards more upside. The chart below represents the Netflow to/from exchanges. It shows that a considerable amount of Bitcoin was withdrawn from exchanges during the recent lows, which is an encouraging sign.

7-day moving average of net exchange flow of Bitcoin from exchanges. Source: Glassnode

Additionally, the inflow coming to exchanges has been traded at a higher intensity since the year’s first half. The ratio of Bitcoin’s daily trading volume against BTC inflows to exchanges has surged since July, suggesting that more market participants want to buy than sell.

Bitcoin trade intensity. Source: Chainalysis

Considering that Bitcoin has recovered above the long-term resistance from its realized price, the recent movement across exchanges indicates significant buying activity between $19,000 and $22,500, with ongoing accumulation. Until these on-chain conditions change, the uptrend in BTC will likely continue in the short-term.

Technical Indicators Flash BTC Buy

Several technical buying signs surround Bitcoin at the moment. The weekly moving average convergence/divergence (MACD) and relative strength (RSI) indicators are turning bullish, and BTC recorded a second consecutive week above its 200-week moving average.

The William’s Alligator indicator, an old favorite of mine, suggests that if the price remains above the $23,000 level, a move to $26,500, may be even higher, is possible.

Should Bitcoin gain upside traction this week, the Williams Alligator indicator strongly suggests a significant rally in the medium term.

This indicator last flashed a buy signal on the daily time frame back in October 2021. The signal ended in late November 2021, and you know the story since then. Along with the market, the indicator has been strictly in a bear mode.

Conversely, a new bear trend will likely start if the price sinks under $22,000. This scenario currently seems somewhat of a stretch without a significant bearish catalyst.

BTC/USD Daily chart. Source: Trading View

Rock Solid ETH

Ethereum is ahead of the pack in terms of how technically mature the short-term breakout appears. The strong dip-buying over recent weeks on pullbacks is encouraging.

ETH/USD has recently moved above an important trendline (see chart below) on the daily time frame chart and looks like it could be headed towards the $2,200-2,400 area.

Additionally, the William’s Alligator indicator is starting to trend higher. The buy signal is not that strong yet. Still, if we see another leg higher, this indicator will start to flash a solid medium-term buy signal.

ETH is in a great spot while it trades above the $1,425 level. I would like to see the $1,600 support level holding this week so ETH can head towards $2,000. 

ETH/USD Daily chart. Source: Trading View

The Market’s Tipping Point

The Crypto Total Market Capitalization chart depicts the entire market at a tipping point, with the $1.08 trillion mark as the threshold point.  

Should buyers break the  $1.08 trillion resistance with conviction, it would mean that a critical long-term trendline has been breached, and $1.4 trillion would become possible. The William’s Alligator indicator will also probably start to issue a strong buy signal.

Conversely, a rejection at the $1.08 trillion mark could provoke another painful test of the $1 trillion level. Much under this support region, and it will be tough for the market to climb back up.

Crypto Total Market Cap Daily chart. Source: Trading View

It Can Happen

I believe that this week’s U.S. CPI report will be the big market mover for the crypto market. If the notion that “inflation has peaked” persists, we could see some solid gains from Bitcoin and other digital assets.

The charts and market fundamentals suggest that the above favorable scenario is more likely than nit. Bitcoin has shown tremendous resilience on price dips recently, and it has been challenging for bears to break big psychological numbers, like $22,500. These are very good signs indeed.

If bulls can anchor the Bitcoin price above the $24,500 level this week, $26,500 seems highly likely. Additionally, the upcoming Ethereum Merge and bullish price action of ETH could also lend some support to a late-summer rally in the crypto space.