Bitcoin mining difficulty surpasses 50 trillion

Bitcoin (BTC) is starting the new week with a different mood as the weekly candle close brings a move higher. The largest cryptocurrency, which has been stuck in a narrow range, is finally showing signs of life after several spikes to two-month lows. Despite the return of volatility, traders remain conflicted about whether short-timeframe strength can lead to an overall trend breakout.

Opinions differ as May ends and brings a macroeconomic showdown, which is already making itself felt: the United States debt ceiling deal. With an agreement to raise the ceiling and avoid a U.S. government default almost here, risk assets may see relief across the board. However, since stock markets are closed until May 30, Bitcoin traders will have to play a game of “wait and see” to start the week.

Bitcoin itself is always open, and the debt ceiling appears to have formed an impetus for optimism despite representing little in terms of macroeconomic policy trends. With that, the conversation within crypto is all about what happens next.

Cointelegraph looks at these and some other important factors to consider when it comes to BTC price action in the coming days.

Debt ceiling deal nears Congress

After several weeks of negotiations between Republican and Democrat lawmakers, the Biden administration has formed and presented a solution to the U.S. debt ceiling debacle and presented it to Congress. While it remains unknown whether it will pass, bets are already front-running the outcome.

“I think it is virtually certain that it will be passed,” Jeremy Siegel, professor of finance at the University of Pennsylvania, told CNBC, summarizing a popular theory.

An actual doom scenario, others have pointed out, is unlikely, as the deal stalling at this point does not immediately open the U.S. to a default scenario.

“The coming week will still bring uncertainty around the debt ceiling as the agreement makes its way through Congress,” trading firm Mosaic Asset said in the latest edition of its newsletter series, The Market Mosaic.

News of the deal itself worked instant magic on a lackluster BTC/USD, which saw some classic end-of-week volatility to briefly hit $28,450 overnight. Currently trading at just below $28,000, the pair has managed to improve its outlook, even as it concerns the intraweek trend.

“Now that’s a really good BTC Weekly Close,” popular trader and analyst Rekt Capital responded.

Rekt Capital had previously warned about a broader breakdown that could take BTC price action back toward $20,000. “Dip into black would be healthy and successful retest there could position BTC for a revisit of ~$28800,” he now said, flagging the zone to hold in the event of a subsequent dip to support.

Analysis further raised the possibility of Bitcoin invalidating a recently-formed head-and-shoulders pattern on daily timeframes, which is typically linked to the start of a long-term bearish phase.

“BTC is in a very early Bull Market,” Rekt Capital added.

CME gap guides BTC price dip bets

With that, Bitcoin is providing fuel for debate as bulls inch closer to testing the top of what has been a stubborn multimonth trading range.

Those who bet on the downside continuing this week have already been caught short, losing $44 million of positions liquidated on May 28 alone, which represents a one-month high, according to monitoring resource CoinGlass.

What we are seeing is just bears getting squeezed shorting, sideways action as bears reload their shorts, then another squeeze stopping them out again, rinse and repeat lol. We probably continue pushing up until these bears calm tf down. $BTC

— CrediBULL Crypto (@CredibleCrypto) May 29, 2023

However, for well-known market participants, there is still cause to stay conservative on what comes next. Trader Skew noted that Bitcoin’s weekend upside had opened up a gap in CME futures, with the implication that BTC/USD should dip lower to “fill” it at the open. “Could see a sell-off post-debt ceiling deal & then gold/btc go on a run before the final rug,” part of Twitter commentary stated on May 29.

Fellow trader Mark Cullen noted that bid liquidity from nearer $25,000 had shifted higher, with traders anxious to get buy orders filled. “Every time I do this I tend to kick myself as the would have been filled in the end,” he acknowledged, suggesting that a return toward that level remained on the table.

Trader Daan Crypto Trades meanwhile said that the battle for upside continuation was still ongoing, with a “key” resistance level still to be won.

#Bitcoin Testing the upper resistance of this flag/wedge. Upon confirmation of a breakout, this should lead to the next leg higher up.

— Daan Crypto Trades (@DaanCrypto) May 29, 2023

A new milestone for Bitcoin difficulty

For Bitcoin network fundamentals, the trend is as decisively bullish as at any time this year, with new all-time highs imminent. Mining difficulty is due to add 2.5% on May 31, taking it over 50 trillion for the first time ever, according to data resource

Add hash rate into the equation — itself circling the highest levels ever recorded — and the picture becomes clear regarding miner conviction and competition.

As noted by analytics firm Glassnode last week, miners have returned to holding, increasing their overall BTC balances by retaining more BTC earnings than they sell. “Following a large outflow of Bitcoin across the FTX implosion, Miners (excluding Patoshi and early unlabelled Miners) have expanded their balance sheet by +8.2K BTC, increasing their holdings to a total of 78.5K BTC,” it noted alongside a chart.

Meanwhile, William Clemente, head of crypto research firm Reflexivity Research, contrasted the current trend in hash rate versus spot price with Bitcoin’s 2019 price recovery.

One of the biggest differences between this Bitcoin bear market and the last one is that in 2019 hash rate didn’t reach new highs until BTC ~3xed off its lows while today hash rate has over 2xed its prior May 2021 high while BTC itself is only up 75% off its lows

— Will Clemente (@WClementeIII) May 23, 2023

As Cointelegraph often reports, a popular mantra still held by some longtime market participants focuses on spot price following hash rate on longer timeframes.

Hodl trend in “up only” mode

Ongoing monitoring of Bitcoin hodlers produces few surprises, as long-term investors refuse to sell, ferreting away more of the supply on a daily basis.

Dedicated buyers have been holding onto their Bitcoin (BTC) for longer periods of time, resulting in fewer BTC being available for purchase. This is reflected in Glassnode’s “Hodled and Lost Coins” metric, which has reached multi-year highs. At 7,725,079 BTC, this metric now accounts for more BTC than at any time since May 2018.

Cointelegraph previously reported that short-term price trends were becoming increasingly dependent on the actions of short-term holders, who are typically involved in speculative trading activity. These investors, who have held BTC for 155 days or less, currently have a cost basis of $26,500, making that level a key support zone.

Furthermore, there are now more Bitcoin wallets with a non-zero address than ever before, with the number climbing to over 47 million.

A bullish crossover in the Moving Average Convergence Divergence (MACD) is giving some investors pause for thought this week. This signal has historically been followed by at least a 40% upside on two occasions this year. Popular trader Captain Faibik has noted that this event occurred on May 27, and wonders if history will repeat itself. The MACD subtracts the 26-period exponential moving average (EMA) from its 12-period equivalent, creating a “signal line” which offers a form of Bitcoin top and bottom signal when compared to the MACD value.