Fed takes on stablecoins: 5 things to watch in Bitcoin this week

Bitcoin (BTC) emerges into a new week with middling price action and optimistic fundamentals — what could the coming days have in store?

Still holding $30,000 support, there’s little about Bitcoin to truly excite traders, but volatility has already reminded them of its presence over the past week.

As a recovery in mining continues, everyone is playing a game of “wait and see” when it comes to the 2021 Bitcoin bull market.

Cointelegraph takes a look at five things that might give BTC price action some direction in the short term.

Dollar sees strength as stocks calm advance

It’s a classic summer picture in equities — a slight comedown last week followed all but constant gains, with caution coming from Covid-19, inflation and other triggers.

This time of year, however, is renowned for its lack of action, and even recent changes amount to little on a wider scale.

“The Covid backdrop is just one of several factors that may be adversely impacting the reflation trade,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, wrote in a note quoted by Bloomberg.

The U.S. dollar gained some strength from the modest shake-up in stocks, with the U.S. dollar currency index (DXY) climbing toward 93.

As Cointelegraph reported, DXY’s inverse correlation to Bitcoin remains in the spotlight for some — a short-term peak for the index may correspond to price pressure for BTC/USD.

Another focus is oil on the back of a lessening of tensions among OPEC+ members and a fresh agreement to boost output. While traditionally less impactful on Bitcoin behavior, any unexpected volatility can provide fuel for a low-volume cryptocurrency market.

This was witnessed last week, as reports of Bank of America greenlighting Bitcoin futures trading for select clients swiftly sent BTC/USD $1,000 higher.

Actions by another bank, namely the U.S. Federal Reserve, may be more important this week. A working group on stablecoins will get the attention of Treasury Secretary Janet Yellen when it is convened with the goal of “intra-agency work.”

Weekly candle raises risk of $29,000 drop

On spot markets, Monday began with hope for the future rather than confidence in current price events.

The weekend saw seesawing from BTC/USD, still unable to beat resistance at $32,000 or higher but likewise apt to avoid tests of $31,000 support.

At the time of writing, $31,750 formed a focus on lower timeframes, with ranging firmly the defining feature of the hourly chart.

“It’s time for a green week for Bitcoin,” popular trader Michaël van de Poppe ventured.

Talk of if and when a Bitcoin price bottom could occur remains a major talking point. As Cointelegraph noted on Sunday, the drawdown from the most recent all-time high of $64,500 has now lasted for three months — the second-longest ever within a bull cycle.

With popular opinion favoring a return below $30,000, Van de Poppe argued that a bottom may not be as dramatic as expectations demand.

“A bottom usually doesn’t look great, as the majority of the people are expecting further downwards movements of the markets,” he told Twitter followers.

“A bad weekly candle doesn’t have to mean prices are going to fall further.”

That candle did indeed disappoint, with Sunday’s weekly close on BTC/USD being its lowest of 2021 so far.

For trader and analyst Rekt Capital, an ability to reclaim $32,000 is a problem in itself, opening up the path to levels around $29,000.

“Bitcoin is threatening to lose its Weekly support (~$32000). Today is the last day for $BTC to reclaim this support,” he warned Sunday alongside an accompanying chart.

“Lose it and there is little higher timeframe support to stop BTC from another revisit of the green area.”

Difficulty beats expectations

In contrast to price, Bitcoin’s network fundamentals continue their march back to strength after the…