Countdown to Grayscale’s big BTC unlock: 5 things to watch in Bitcoin this week

Bitcoin (BTC) starts a new week in familiar territory — crucial support is back, but bulls have not yet got their breakout. Could that soon change?

After reclaiming $33,000 on Friday, BTC/USD has held on to the trading corridor it had been in before last week’s brief volatility. 

That involved a dip to $32,000 on the back of sudden short positions accumulating on exchange Bitfinex.

The impact was only temporary, however, and the weekend has seen highs of $34,600 on Bitstamp.

Cointelegraph present five factors to consider when eyeing what Bitcoin might do next.

Stocks boom as USD hits classic resistance

With stocks going upwards as usual, there seems to be little in terms of friction that could cause problems for cryptocurrency gains.

While analysts are increasingly warning about a comedown in the future, the mood in equities remains firmly buoyant this week.

“There does seem to be a complacency that Goldilocks is not only alive and well, but that it’s getting stronger by the day,” Simon Ballard, chief economist at First Abu Dhabi Bank, told Bloomberg.

“Unfortunately, it has to be recognized that going forward, the longer that rates remain where they are, the more that we look toward tapering, the more severe and acute could be the reaction.”

The U.S. dollar, however, could provide more clues.

Taking a look at the U.S. dollar currency index (DXY), which measures USD strength against a basket of 20 trading partner currencies, the picture shows some familiar resistance is back in play.

Late last week, one analyst argued that DXY needed to rise from its current 92.2 to around 94 in order to see major resistance kick in which would boost Bitcoin.

On Monday, however, DXY is still recovering from losses it incurred at the end of the week, also battling a zone which has kept it in check in the past.

Bitcoin’s inverse correlation to DXY has also been placed under the microscope recently, as BTC increasingly forges its own path within the macro environment.

Bitcoin price “doing all the right things”

Looking at the spot market, traders are bullish at the prospect of $33,000 returning and enduring after a brief bearish episode last week.

After “reaffirming” the level, trader and analyst Rekt Capital explained on Sunday, BTC/USD is back at the lower end of an established range.

“BTC is breaking back above the orange trendline,” he said in a subsequent update alongside a chart showing the current landscape. 

“$BTC is doing all the right things to reclaim this trendline as support. Reclaim the trend line as support and that’ll be great progress towards challenging for a breakout from this blue wedging structure.”

Monday has continued the trend, with Bitcoin trading at around $34,350 at the time of writing.

“Bitcoin is trying to rally and close an 8th week in a row above 34k with a long wick down. Lots of demand still,” fellow trader Scott Melker added.

Last week, targets of up to $39,000 were in for Bitcoin should bulls manage to attack $35,500 resistance and continue, something which in the event failed to occur.

Fundamentals sustain their comeback

If last week’s price action disappointed, under the hood, Bitcoin has been working on a more important turnaround.

Data from monitoring resources on Monday shows that both network difficulty and hash rate are stabilizing and that therefore, the worst of the recent mining turbulence could be firmly over.

After its record drop earlier in July, difficulty was previously on track to beat even its latest performance and shed another 28% or more.

In the intervening period, however, a recovery has started to take place. Now, the next difficulty adjustment should only see a 10% drop, should price action remain near current levels.

“Blocks coming in at a rapid phase – next difficulty adjustment is now estimated at ~ -7.5% but it seems to me like hash rate is coming back…