Bitcoin (BTC) Begins the Second Week of February in a New Bearish Mood, as multi-month highs do not hold.
In what could be the vindication of those who predicted a major BTC price drop, The BTC/USD pair is back below $23,000, and is making lower lows on hourly time frames.
Operations on February 6 may not have started yet in Europe or the United States, but Asian markets are already falling and the US dollar is rising, which could pose yet another hurdle for bitcoin bulls.
With some macroeconomic data coming out of the Federal Reserve this week, the focus is mainly on next week’s inflation check in the form of the Consumer Price Index (CPI) for January.
On the eve of this event, the results of which are already highly controversial, volatility may once again take over risk assets.
If we add to this the already mentioned concern that bitcoin should have suffered a more significant pullback than seen in recent weeks, the recipe is there for difficult, but potentially lucrative trading conditions.
Cointelegraph takes a look at the bitcoin situation this week and considers the factors at play to move the markets.
BTC price disappoints with its weekly close
It is very much a tale of two bitcoins when it comes to analyzing the BTC price action this week.
The BTC/USD pair has managed to hold onto most of its impressive January gains, which amount to almost 40%. However, there are more and more signs of a fall.
The weekly close, although comparatively strong, just below $23,000, still does not exceed the previous oneand it also represented a rejection at a key resistance level from mid-2022.
“BTC is failing its retest of $23,400 at the moment”, summarized popular trader and analyst Rekt Capital on the subject on February 5.
An accompanying weekly chart highlighted support and resistance zones in play.
“Important. BTC may have a weekly close above this level for an upside opportunity. August 2022 shows that a failed retest could see BTC drop deeper into the blue-blue range,” he continued.
“Technically, the retest is still ongoing.”
As Cointelegraph reported over the weekend, Traders are already betting on where a potential pullback may end up, and what levels could act as ultimate support to fuel bitcoin’s new bullish momentum further.
These are currently centered around $20,000, a psychologically significant number. and also the site of bitcoin’s former all-time high of 2017.
The BTC/USD pair was trading around $22,700 at the time of writing.according to data from Cointelegraph Markets Pro and TradingView, and continued to decline during Asian trading hours.
“Some offers filled in this recent push lower (green box), but most of the remaining offers below have been pulled (red box)”, wrote The Credible Crypto Trader about the order book activity on February 5th.
“If we continue to drop here, eyes will continue to be in the $19,000-21,000 region as a logical bounce zone.”
For a calm and confident Il Capo of Crypto, meanwhile, it’s about time for the crunch when it comes to trend reversal. A supporter of fresh macro lows along with January gains, the trader and social media expert argued that breaking below $22,500 would be “bearish confirmation.”
“The current bear market rally has created the perfect environment for people to continue buying dips when the current trend reverses,” he wrote. during a discussion on Twitter.
“It is the perfect setting for a capitulation event to occur in the coming weeks.”
The Fed will speak and the market will be attentive to the CPI
The macro week looks decidedly quiet compared to the beginning of February; there is less data and more comments that will define the mood.
Those comments will be courtesy of Fed officials.including President Jerome Powell; Any hint of policy change contained in your language has the potential to change the markets.
Just such a phenomenon occurred the week before, as Powell used the word “disinflation” no less than fifteen times during a speech and question-and-answer session accompanying the Fed’s decision to raise interest rates by 0.25%.
Awaiting new key data next week, There is talk in analytical circles of how and when the Federal Reserve could move from a tight economic policy to an accommodative one.
As Cointelegraph reported, Not everyone believes that the US will make a “soft landing” in terms of lowering inflation and experience a recession instead.
“Don’t be surprised if the term ‘soft landing’ sticks around for a while before the blanket is pulled in the third or fourth quarter of this year,” investor Andy West concluded, co-founder of Longlead Capital Partners and HedgQuarters, in a Twitter thread weekend.
Meanwhile, it may be business as usual, with minor rate hikes following Powell’s “mini victory lap” on lowering inflation, according to other analyses.
“Personally, I think the Fed will most likely hike rates by 0.25% in the next two meetings (March and May),” wrote Caleb Franzen, market analyst at CubicAnalytics, in a blog post on February 4.
“Of course, all future Fed actions will depend on continued developments in inflation data and broader macroeconomic conditions.”
Franzen acknowledged that although the recession is currently not an accurate description of the US economy, conditions could still worsen in the future.referring to three cases of this type in recent years.
Closer to us next week’s CPI release is already on the radar of many. The extent to which the January data supports the falling inflation narrative will be key.
“After the FOMC, we have a bunch of second-tier data releases, including the major ISM services and NFPs,” trading firm QCP Capital wrote. in a forward-looking guide emailed to subscribers of his Telegram channel last week.
“However, the decisive data will be the Valentine’s CPI, and we believe there are upside risks in that release.”
Miners’ “relief” contrasts with BTC sales
Coming back to bitcoin, it is the fundamentals of the network that currently offer some stability in the midst of a turbulent environment.
According to current estimates from BTC.com, difficulty is holding steady at all-time highs, with only a modest negative readjustment expected in six days.
However, this could turn out to be positive depending on how the bitcoin price evolves, and a look at the hash rate data suggests that miners are still in fierce competition.
A counter-trend comes in the form of the economic behavior of miners. The latest data from on-chain analytics firm Glassnode shows that BTC sales by miners continue to rise, while their reserves fall more rapidly in 30-day periods.
Reserves reached their level lower in a month on February 6, with a balance of 1,822,605,594 BTC.
In general, the current price developments have brought a “relief” for miners, says Philip Swift, Co-founder of the Decentrader trading suite.
In a Tweet from last week, Swift was referring to the Puell Multiple, a measure of the relative value of mined BTC, which has left its “capitulation zone” to reflect higher profitability.
“After 191 days in the capitulation zone, the Puell Multiple has rallied. It shows relief for miners through increased revenue and a likely reduction in selling pressure,” he commented.
NVT suggests volatility will pay off
Some on-chain data continues to rise despite slowing BTC price gains.
Of interest this week is Bitcoin’s Network Value for Transaction Signal (NVT), which is now at levels not seen in almost two years.
The NVT signal measures the value of BTC transferred on-chain against bitcoin’s market capitalization. It is adapted from the NVT ratio indicator, but uses a 90-day moving average of transaction volume instead of raw data.
That the NVT is at multi-year highs may be cause for concern; the valuation of the network is relatively high compared to the value transferred, a scenario that may turn out to be “unsustainable”, in the words of its creator, Willy Woo.
As Cointelegraph reported late last year, there are multiple nuances to NVT that cause its various incarnations to diverge from one another to provide a complex picture of on-chain value at a given price.
“Bitcoin NVT is showing signs of value normalization and the beginning of a new market regime,” commented charles edwards, CEO of crypto investment firm Capriole, on a new NVT adjustment, dubbed Dynamic Range NVT, on Feb. 6.
“The message is the same throughout history and most of the time it is good news in the medium and long term. In the short term, this is a place where we typically see volatility.”
Small bitcoin wallets show “trader optimism”
In a ray of hope, on-chain research firm Santiment notes that the number of smaller bitcoin wallets has skyrocketed this year.
Since the BTC/USD pair crossed the $20,000 barrier again on Jan. 13, 620,000 wallets have reappeared with a maximum of 0.1 BTC.
That event, says Santiment, marks the moment when “FOMO returned” to the market, and the subsequent growth in the number of wallets means that these are at their highest point since November 19.
“There have been ~620,000 small bitcoin addresses reappearing on the network since FOMO returned on Jan 13, when the price rebounded to $20,000,” confirmed the comment on Twitter on February 6.
“These 0.1 BTC or less addresses grew slowly in 2022, but 2023 is showing a return of trader optimism.”
A look at the Cryptocurrency Greed and Fear Index shows that “greed” remains the leading description of market sentiment.
On January 30, the index reached its most “greedy” level since bitcoin’s all-time highs of November 2021.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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