Weekly Forecast: Bitcoin’s Bullish Outlook Intact Following SEC Decision
Bitcoin’s bullish breakout extended to two-month highs last week, as prices crossed $8,500 for the first time since May. However, the bulls were tested on Thursday after the U.S. Securities and Exchange Commission (SEC) denied a second application by Cameron and Tyler Winklevoss to list a bitcoin ETF.
Despite the SEC’s rejection, the cryptocurrency market remains in a firm uptrend. Over the next seven days, the key test is whether bitcoin can defend its current level and extend the breakout beyond the 200-day moving average, currently at $8,494.
Cryptocurrency Market Aims Higher
Bitcoin’s bullish outlook remains intact following the successful defense of $8,000. A combination of technical support and bullish bias suggest that further upside is likely in the near term.
The broader cryptocurrency market has more or less followed in bitcoin’s lead over the past four weeks. Since bottoming near $234 billion one month ago, the total market has recovered $63 billion. Unlike previous rallies, the market share of altcoins and tokens relative to bitcoin has declined. At the time of writing, altcoins represents 52.6% of the total market, according to CoinMarketCap.
Trade volumes will be key in sustaining the next leg of the rally. As Hacked recently reported, turnover more than doubled on Saturday following a sudden spike in ether trade volumes. Over the span of just 13 hours, Ethereum’s trade volumes surged from around $1.7 billion to nearly $12 billion, a level not seen this year.
Despite the SEC’s decision to block the Winklevoss ETF, investors are hopeful that a forthcoming decision on a joint proposal submitted by VanEck and SolidX will yield better results. An SEC ruling on the matter could come as early as Aug. 16.
On July 20, VanEck issued a letter to the SEC reiterating industry-wide support for the proposed ETF. According to VanEck, bitcoin has sufficient liquidity through the futures market, with derivatives contracts issued by CBOE and CME trading closely to the bitcoin spot price. In VanEck’s view, this should alleviate concerns over price manipulation.
The SEC’s position on bitcoin has softened in recent months after the agency recognized that the asset is “sufficiently decentralized.” However, it remains to be seen whether this will translate into green lighting the first bitcoin exchange-traded fund.
Monetary Policy in Focus
Investors with exposure to stocks, bonds or the currency market will be keeping close tabs on monetary policy this week.
On Tuesday, the Bank of Japan (BOJ) will deliver a policy verdict alongside its quarterly outlook report. Although the BOJ is not expected to raise interest rates, policymakers may consider tweaking the central bank’s massive stimulus program.
The U.S. Federal Reserve will coalesce in Washington on Tuesday for a two-day policy meeting. The official interest rate decision is scheduled the following afternoon. Policymakers are widely expected to stand pat this week but are likely to speak favorably about the economy following last week’s Q2 GDP figures.
Meanwhile, the Bank of England (BOE) is expected to raise interest rates at the conclusion of its policy meeting on Thursday. An expected quarter-point hike would bring the Bank rate to 0.75% – the highest since March 2009.
The Week Ahead
For traditional markets, the following events will be in the headlines over the next five days.
The week begins with a deluge of Eurozone sentiment indicators covering services, business, industrial confidence, consumer confidence and economic sentiment. Separately, Germany will unveil the latest consumer inflation report for July.
A pair of Chinese PMI reports covering manufacturing and services activity kick off an active Tuesday session on the economic calendar. In terms of monetary policy, the BOJ will deliver its high-profile interest-rate decision at the start of Asian trading.
In Europe, reports on unemployment, inflation and GDP will make headlines throughout the session. Eurozone GDP likely grew 0.4% in the second quarter following a similar gain in January-March. That translates into year-over-year growth of 2.4%.
In the U.S., the monthly personal income and outlays report will make headlines Tuesday. The monthly data set includes the latest core personal consumption expenditures (PCE) index, the Federal Reserve’s preferred measure of inflation.
On the data front, payrolls processor ADP will report on U.S. private sector job creation Wednesday morning. Private payrolls likely rose by 175,000 in July, according to a median estimate of economists.
In monetary policy, the U.S. Fed will deliver its interest-rate verdict at 2:00 p.m. ET.
The Bank of England’s interest rate decision will be handed down Thursday at 7:00 a.m. ET.
In terms of economic data, U.S. initial jobless claims and factory orders are due for release Thursday morning.
The U.S. nonfarm payrolls report, arguably the most closely watched calendar event of the month, is due for release Friday morning. The world’s largest economy likely added 195,000 jobs this month following a net gain of 213,000 in June. In addition to the total jobs tally, nonfarm payrolls will also report on unemployment and average hourly earnings – two important gauges of economic health.
Separately, the Commerce Department will report on the U.S. trade balance on Friday. Washington’s deficit with the rest of the world is forecast to hold steady for the month of June.
The Institute for Supply Management (ISM) will release the July edition of U.S. services PMI Friday morning. Later in the session, Baker Hughes Inc. will report on active U.S. oil rig counts for the latest week .
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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