Conflict, Consumer Price Index, and $28,000 Bitcoin valuation — 5 key points to understand in Bitcoin this week.

Bitcoin (BTC) begins the second week of October with a 4% increase month-to-date as geopolitical tensions shift market attention.

The price of BTC remains stable around $28,000, but the question arises: what will occur next as markets respond to the conflict in Israel?

As a potentially turbulent phase for risk assets unfolds, Bitcoin has not yet shown a significant response, remaining within a narrow range over the weekend.

This situation may soon change, however, as Wall Street opens amidst rising oil and gold prices, coupled with a strengthening U.S. dollar.

Macroeconomic catalysts are also plentiful, with the upcoming days set to reveal the September reading of the U.S. Consumer Price Index (CPI). Following unexpected employment figures last week, this report carries added significance for the Federal Reserve.

On-chain indicators, meanwhile, suggest intriguing developments for Bitcoin, as BTC/USD trades within a crucial range that has emerged as a pivotal area since 2021.

Cointelegraph examines these elements and more in the weekly overview of potential BTC price influences ahead.

Bitcoin “illiquid and choppy” as weekly close passes

The weekend saw market participants entirely focused on the sudden outbreak of conflict in Israel, and as markets reopen, changes are already underway.

For Bitcoin, however, the current events have yet to trigger a noticeable chain reaction, according to data from Cointelegraph Markets Pro and TradingView.

BTC price movements have remained centered around $28,000 since Friday, and this level is critical as traders anticipate a shift from resistance to support.

BTC/USD 1-hour chart. Source: TradingView

“Nothing significant occurred this weekend,” Daan Crypto Trades noted on X (formerly Twitter) as the weekly close approached.

“I would expect volumes to increase soon, but ultimately we should remain around this price level until futures reopen tonight.”

A subsequent post highlighted that Bitcoin has not yet convincingly surpassed the 200-week moving average (MA), which is currently at $28,176.

Examining the 4-hour chart, well-known trader Skew characterized BTC price activity as “illiquid and choppy.”

$BTC 4H
these wicks really indicate how illiquid & choppy price action is pic.twitter.com/Qq13GsuqfB

— Skew Δ (@52kskew) October 9, 2023

“Bitcoin’s bullish flag remains intact — but it is taking too long to materialize,” fellow trader Jelle remarked, looking at monthly performance.

“October is typically the most bullish month of the year, so I still expect this one to break out upwards.”

BTC/USD annotated chart. Source: Jelle/X

War returns to crypto observers’ radar

Regarding price triggers, the ongoing conflict in Israel has Bitcoin and crypto market participants bracing for further volatility.

With the memory of Bitcoin’s response to the war in Ukraine in February 2022 still fresh, Jelle expressed caution about the potential impact on BTC/USD moving forward.

“What I do know is that the Ukraine war triggered an 8% down candle, which was recovered within a day,” part of the day’s commentary on X noted.

Mike McGlone, senior macro strategist at Bloomberg Intelligence, described Bitcoin as currently exhibiting a “risk-off tilt” among traders.

“My view is that the downward sloping 100-week moving average is likely to prevail against the uptrending 50-week. Rising #crudeoil is a liquidity pressure factor,” he stated on Oct. 8.

BTC/USD vs. Fed funds futures with 50, 100-week MA chart. Source: Mike McGlone/X

At that time, the 100-week and 50-week MAs were positioned at $28,938 and $24,890, respectively.

McGlone also commented on a developing macro asset trend, with gold rising 1% on the day and Brent crude increasing by 3.25% ahead of the Wall Street opening.

“Markets are reacting quite defensively,” Skew added, noting renewed strength in the U.S. Dollar Index (DXY), which rose by 0.4%.

Last week, the DXY reached its highest levels since late 2022.

DXY 1-hour chart. Source: TradingView

CPI leads “huge week for inflation”

In the U.S., the focus is on this week’s macroeconomic data releases, highlighted by the September CPI report.

After last week’s jobs data indicated that employment levels remained robust despite the Fed’s anti-inflation measures, Bitcoin briefly retreated over concerns that officials might implement another interest rate hike, further tightening liquidity.

While BTC/USD recovered, those concerns persist.

“Positive CPI data on Thursday could provide an opportunity to break out from this range, whereas a high CPI would push us back into the range lows with the assumption that the FED might be compelled to raise by 25bps,” part of the weekend analysis from popular commentator CrypNuevo stated.

Fed target rate probabilities chart. Source: CME Group

According to data from CME Group’s FedWatch Tool, markets are increasingly anticipating that rates will remain at current levels on the decision day, scheduled for Nov. 1.

In addition to CPI, this week will also feature the Producer Price Index (PPI) release, along with more jobless claims and a total of 12 Fed speakers providing commentary. The minutes from the Fed meeting regarding the previous rates decision will also be released on Oct. 11.

Key Events This Week:
1. September PPI Inflation – Wednesday
2. Fed Meeting Minutes – Wednesday
3. September CPI Inflation – Thursday
4. OPEC Monthly Report – Thursday
5. Jobless Claims Data – Thursday
6. Total of 12 Fed speaker events
Huge week for inflation and the Fed.

— The Kobeissi Letter (@KobeissiLetter) October 8, 2023

“Huge week for inflation and the Fed,” financial commentary resource The Kobeissi Letter summarized in part of an X thread.

“Additionally, markets will respond to geopolitical tensions from this weekend. Volatility is the new normal.”

NVT signal spikes to highest since 2018

Within Bitcoin, the network value to transaction (NVT) signal leads the way in on-chain metric volatility as the week begins.

NVT, which its creator, Dmity Kalichkin, refers to as a “PE ratio” for Bitcoin, aims to estimate local BTC price peaks and troughs by comparing market capitalization to daily on-chain transaction values.

The latest figures from on-chain analytics firm Glassnode indicate NVT reaching its highest levels in five years — exceeding 1,750 and significantly surpassing its position at the start of 2023.

Bitcoin NVT signal chart. Source: Glassnode/X

NVT has undergone several revisions in recent years, as the dynamics of BTC supply necessitate different guidance figures for identifying price peaks.

“If the trend towards side-chains and private transactions continues, we can expect fewer transactions to be captured in the public on-chain data (reducing the relative value of the “T” in NVT),” Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments, noted in part of his research in 2019.

“This could lead to an increase in the fair value NVT range over time.”

In analyzing the NVT spike, crypto market intelligence platform IntoTheBlock suggested that it signifies a broader transformation.

“The perspective through which we assess Bitcoin’s value is evolving,” it stated over the weekend.

“Transaction value & volume were once the primary metrics. However, recent surges in NVT ratios indicate that Bitcoin’s value is now moving independently of transactional utility, suggesting its increasing role as a store of value.”

Neither fearful, nor greedy

Offering a brief glimpse into crypto market sentiment, the classic Crypto Fear & Greed Index reflects an overall sense of uncertainty.

Related: Bitcoin bull market awaits as US faces ‘bear steepener’ — Arthur Hayes

The average investor appears indifferent regarding the market, as evidenced by the Index remaining firmly in its “neutral” zone.

As of Oct. 9, Fear & Greed stands at 50/100 — precisely in the middle of its scale between the two sentiment extremes.

Looking back, recent months have recorded some of the least volatile conditions on record.

“You know the drill, I will be mass buying when we drop down to Extreme Fear and a $20,000 Bitcoin,” popular trader Crypto Tony responded to the latest data.

“It may take some time, but I believe Q1 / Q2 2024 will be the turning point. If I observe a change in behavior, I will reassess.”

Crypto Tony hinted at the possibility that BTC/USD will revisit $20,000 for a final retest before moving higher following the 2024 block subsidy halving.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

This article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making any decisions.