Key facts:
After crossing below $40,000, $37,000 is signaled as new support.
Bitcoin network metrics remain healthy, despite price drop.
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Bitcoin had an auspicious start to the week that led it to break the resistance of USD 40,000 on February 28, as reported by CriptoNoticias. This momentum allowed bitcoin (BTC) to reach close to USD 45,000 last Tuesday, March 1.
The worsening of the war between Ukraine and Russia, however, contributed to changing the trend, as reported in this medium, and bitcoin registered three consecutive days in red that placed it below USD 40,000 this Saturday. The downtrend continued this Sunday, when the price of bitcoin fell below USD 39,000. At the time of writing the price of BTC is USD 38,331, 15% less than its maximum value of USD 45,000 reached on Tuesday and last Wednesday.
At the beginning of the week, a noticeable feature was noticed in the behavior of bitcoin related to its coupling with traditional actions. The rise in the price of BTC on Monday and Tuesday, contrasted with falls in traditional stocks and stock indices. Although they were very moderate drops, less than 1%, at least they reversed the high correlation trend of bitcoin and traditional assets.
Bitcoin’s bearish streak was reversed in February
The fall in the price of bitcoin after its historical maximum in November 2021, not only led to a red close of that month, but also lasted for two more months. The drop in the initial month of 2022 was 17% and made it the worst January for bitcoin since 2018. In February there were several attempts to change the downward trend and finally that month closed with a 12% rebound, as reported by CriptoNoticias. .
While this is a modest monthly return for bitcoin, the February boom was a nice contrast to the 37.7% drop in the previous three months.
Scenarios for bitcoin price below $40,000
An analysis by CriptoNoticias at the beginning of February highlighted that the range between USD 30,000 and USD 40,000 has been a strong support zone for bitcoin since the beginning of 2021.
Subsequently, the different possible alternatives for the price of bitcoin were examined in the event that there was a breakout of USD 40,000 to the downside, as has happened this week. One of the analysts consulted by CriptoNoticias, Juan Rodríguez, defends the level of USD 37,000 as a probable support.
Featured chart of the week
In each of bitcoin’s major cycles, the price historically bottoms out near the 200-week moving average curve, as shown on the chart. The color of each point indicates the monthly percentage increase of the moving average, according to the bar on the right.
The red and orange points, close to the maximum and with the highest rate of increase, are associated with the moments when it would be more convenient to sell BTC. The blue and purple dots, on the other hand, which are close to the 200-week average, have historically signaled the best opportunities to buy BTC.
This heatmap also serves to point out that the price could be “overheated” (red dots), i.e. above the actual price. Also, the graph indicates when the price of bitcoin can be close to its real value, in the case of the blue dots.
Healthy Bitcoin Metrics Despite Volatility
According to the latest report from the analytical firm CryptoQuant, commented by this medium, the outflow of BTC from exchanges continued. The report indicates that a minimum of 2.37 million BTC in exchanges was reached in the last days, the lowest value of reserves for three and a half years.
After reaching a high of 3 million BTC in April 2021, reserves have decreased by more than 600,000 BTCto reach the value of 2.37 million.