The price of Bitcoin (BTC) is rising nearly 8% in the past 7 days following various interesting macroeconomic developments and reports of a potential capitulation of crypto miners amid the sharp decline that the digital asset’s value has experienced this year.
First and foremost, the United States reported its highest inflation reading in over four decades last week as prices rose 9.1% in June – a figure that exceeded economists’ forecasts for the period as per the Dow Jones by 30 basis points.
Bitcoin’s long-standing reputation as a potential store of value at a point when the purchasing power of fiat currencies is under pressure is being put to the test and, even though detractors have continually pointed to the asset’s negative performance this year, truth is that BTC continues to be the best-performing asset of the past decade at least.
Weaker US Dollar Pushes BTC Higher
The value of the US dollar has been declining since this latest inflation reading came out on 13 June and that has given BTC a much-needed breather following multiple breaks of the widely-followed $20,000 support area.
Weakness in the North American currency is good news for digital assets as it indicates a risk-on move that, even though mild for now, could be signaling an upcoming reversal in the greenback’s uptrend.
Based on the latest price action of the US dollar index (DXY), momentum indicators may be indicating that the rally is entering a phase of exhaustion as the Relative Strength Index (RSI) has entered overbought territory for the first time in just four months.
Perhaps counterintuitively, the higher the number of overbought readings, the higher the odds that an uptrend may be about to be reversed as strong buying momentum can’t last forever and bulls may have already exhausted their ammunition – at least in the near term.
HODLers Are Unwilling to Sell Off their Bitcoin Reserves
A report from Glassnode published a couple of days ago stated that 80% of all USD-denominated wealth invested in BTC has been held for at least three months.
According to the research firm, previous bear markets have hit bottom once the metric has reached similar levels in the past as it indicates a dramatic decrease in BTC’s supply – a positive development considering the asset’s limited circulating and maximum supply.
Long-term investors typically have a strong influence on the mid-term price action of BTC. The higher the number of wallets that have held BTC for long periods, the higher the odds that the price will rise in the near future.
In a recent report from Coinbase, the research team found that “recent BTC selling has been carried out almost exclusively by short term speculators”. Meanwhile, the same report stated that long-term holders “have not been selling into the market weakness” with these holders still accounting for 77% of the token’s circulating supply.
Miner’s Capitulation – Short-Term Bearish, Mid-term Bullish
Miners are compensated for their activities but they can decide if they hold on to their hard-earned tokens or sell them to cover their costs.
In the past 12 months, daily revenues have been decreasing from a peak of $75 million in late 2021 to $17.3 million as of now. Most of this decline is price-driven and it forces miners to sell their Bitcoin (BTC) at a faster pace to pay for the USD-denominated operating expenditures.
When things get as bad as they have in the past few months, miners may also be forced to sell their BTC reserves instead aside from their most recently earned rewards. This has been happening lately according to data compiled by CryptoQuant, which identified the movement of several BTC tokens out of miners’ wallets.
This could indicate that BTC may be due for some more pain shortly but it may also be a signal that the market bottom is near as miners will use the proceeds to shore up their finances and may resume their HODLing once they achieve that goal.
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