Bitcoin (BTC) starts a new week facing multiple hurdles, but with strong internal support: Can Old Resistance Finally Drop Below $50,000?
A correction event now almost in its third month is frustrating many, but conditions may soon turn right for a new charge against bears, say a growing number of analysts.
With inflation running red hot and US lawmakers poised to take the Bitcoin mining debate public this week, there are plenty of potential pitfalls.
But nevertheless, It is beginning to look like Bitcoin is at the point where it is capable of producing a classic surprise when most of the mainstream economy least expects it.
Cointelegraph takes a look at five factors worth paying attention to when charting BTC price action for the new week.
Bitcoin Retains Key Weekly Closing Level
Bitcoin seems decidedly uninterested in tackling even local resistance levels at the beginning of the new week.
After a range weekend with little single price action, BTC/USD is setting lower lows on shorter time frames while avoiding key zones around $44,000.
With Wall Street closed for the holidays, Monday could offer more of the same before the markets offer direction.
But nevertheless, Bitcoin managed to close the week at exactly the crucial point identified by trader and analyst Rekt Capital as helpful in aiding upward momentum.
“A weekly close above ~$43,100 (black) would be a good confirmation sign for BTC to continue higher from here,” wrote on Sunday along with an accompanying price chart.
“By turning black into support on the Weekly, BTC would confirm a re-entry into its ~$43,100-$51,800 range.”
A subsequent drop took the largest cryptocurrency lower – it fell to $42,337 on Bitstamp on Monday at the time of this writing.
Also cautiously optimistic is popular trader Crypto Ed, which is eyeing a possible repeat of last week’s rally above $44,000, something that the bears subsequently called off.
“Although it is early, this looks like the beginning of the continuation of last week’s movement. Cross our fingers!”, summarized in part of his latest update on Twitter.
Last week, meanwhile, Cointelegraph reported that sentiment favors a breakout to the upside as an eventual result of current range behavior.
Congress to Discuss “Cleaning Up” Crypto Mining
The “stage is being set” in more ways than one this week, as The issue of inflation is once again haunting the markets and US politics alike.
Amid a new barrage of headlines about how inflation is hurting consumers, the highest consumer price index (CPI) figure in 40 years is already taking a toll on President Joe Biden’s approval ratings.
According to Goldman Sachs forecasts last week, to curb the 7% rise in the CPI year-on-year, the Fed could enact no fewer than four interest rate hikes in 2022 alone. This, in turn, puts more pressure on weary consumers.
“The stage is being set in the coming weeks,” argument Pentoshi.
closer to home, this week US lawmakers will debate the alleged environmental impact of cryptocurrency mining.
With a significant portion of the Bitcoin hash rate now coming from the United States, any hostile politics will have an impact on market sentiment.. A repeat of the exodus from China starting in May 2021 – and its effect on hash rate and network security – will not be welcomed by anyone.
The hash rate, as Cointelegraph noted, is back at their all-time highs, fully recovered from the events of last year.
The Subcommittee on Oversight and Investigations hearing will take place on Thursday and is titled “Cryptocurrency Cleansing: The Energetic Impacts of Blockchains.”
The hearing will be broadcast in real time that day.
Bitcoin is “a bonfire covered in gasoline”
Bitcoin volatility is falling to multi-year lows, encouraging for its acceptance as a major asset, but it is not something that many expect to last.
According to the Bitcoin Volatility Index, which calculates the standard deviation of daily BTC returns over the past 30 and 60 days, Bitcoin is at its lowest volatility since November 2020, at 2.63%.
Current price movements are thus similar to those before the BTC/USD pair entered price discovery after hitting its 2017 all-time high of $20,000.
For trader, entrepreneur and investor Bob Loukas, the stage is now set for a possible repeat of those events.
“Remember when everyone was loading up on BTC options in September/October for the super cycle. Those are probably down over 80%,” commented, noting that derivatives traders from before the current all-time highs of $69,000 are likely to be more than disappointed.
“The drop in volume speaks to a period of consolidation, likely a period of similar output leading to the Oct 20 move. But I think there is still time to work on this BTC range.”
Even if “exciting” price movements have not yet appeared after the December drop, now they are more likely thanks to the increasingly inaccessible supply of Bitcoin.
“With illiquid supply at its all-time high for this cycle, Bitcoin is essentially a campfire covered in gasoline,” argument market commentator Miles Johal.
“The slightest smell of demand will bring roaring flames.”
As Cointelegraph reported, BTC is being cold-stored, offline, out of reach of speculators.
Interest is “quiet since” early 2021
Amid questions about the absence of retail investors, even after a 40% price drop, new data shows that the sector has, in fact, had little interest in Bitcoin for an entire year.
Looking at new entities appearing on the blockchain, Glassnode analyst TXMC He showed how quiet Bitcoin really has been in terms of retail adoption since January 2021.
A look at the 30-day exponential moving average (EMA) of new entities entering on-chain reveals that the last big increase ended at the beginning of the first quarter of last year.
Since then, despite two new all-time price highs, new entity numbers have fallen and returned to standard rates typically seen after bull cycle peaks.
“Bitcoin bull/bear markets have a different on-chain activity profile”, TXMC explained on Twitter.
“In terms of activity, the last bull run ended in January 2021. It has been quiet since then.”
The data underscores how the average investor has all but forgotten about Bitcoin, even as it swept to new highs and institutional activity remained strong.
Interest levels from Google users have added to the trend; search rates for “Bitcoin” around the world are at levels that were previously the norm as of December 2020.
Miners, while far from underwater at current price levels, are also earning less revenue from transaction fees than at any time since the end of 2020.: only 1.08%.
“This is an indicator that retail hasn’t really taken off yet… Although the price is really similar to what it was in early 2021, when will it take off?” consulted this weekend Twitter-based on-chain analyst Blockwise, presenting more data from Glassnode.
Be afraid, be afraid “extreme”
Bitcoin’s “extreme fear” in the new year continues, and if on-chain behavior is something to consider, it will continue to be the dominant force of sentiment.
According to him Cryptocurrency Fear and Greed Index, which measures market sentiment across a basket of factors to assess how traders are likely to act at a given price point, things have rarely been bleaker.
Since late December, the Index has characterized the status quo as “extreme fear”, and so far, no price change has managed to alter it.
Same thing this week: the Fear and Greed Index is at 21/100, well within the “extreme fear” range.
In the same way, data covering BTC movement at a profit or loss shows timidity among carriers, with very little profit.
This behavior is common during price drops and was seen last year during the summer, when the BTC/USD pair fell and bottomed around $30,000.
“This is the true Fear and Greed Index.” commented the popular On-Chain College Twitter account, uploading the data, which comes from Glassnode’s realized profit/loss ratio indicator.