Bitcoin (BTC) starts the week with fresh 2023 highs, but remains divided after bullish price rally.
What’s the Antidote to Last Year’s Slow Hemorrhaging Low Prices January brought the volatility bitcoin bulls have been waiting for, but can they sustain it?
This is the main question for market participants entering the third week of the month.
Opinion remains divided on Bitcoin’s fundamental strength. some believe outright that the march to two-month highs is a “sucker rally,” while others hope the good times will continue, at least for now.
Outside of market dynamics, there is no shortage of potential catalysts waiting to assert their sentiment.
US economic data will continue, while corporate earnings could add some fresh volatility to stock markets this week.
Cointelegraph takes a look at five potential BTC price moves as all eyes focus on new support levels and the fate of the Bitcoin bear market.
With BTC price consolidating, analysts agree
Bitcoin has faced increasing skepticism after breaking through some key resistance levels in the past week.
As Cointelegraph reports, the long-term consensus remains tilted to the bearish side, and few believe the current momentum will end as anything more than a bear market rally.
With warnings of new macro lows at $12,000 still in place, Bitcoin is being closely watched for signs of a downside. So far, however, this has not come true.
The weekly close was tied just before the end of FTX, and at the time of writing, BTC/USD was still above $20,000, hitting a new overnight local high of $21,411, data from Cointelegraph Markets Pro and TradingView showed. :
Volatility remained in action, with moves of several hundred dollars during the usual hourly periods. At the time of writing, it was below the $21,000 mark described commented by Tedtalksmacro as “liquidity hunting”.
Analyzing levels to hold for a broader reversal, Chain Analytical Resources Material Indicators revealed the 21-week moving average (MA) at $18,600.
“Another $11 Million Bid Wall Installed To Protect Bitcoin 2017 Top” noted Along with an additional Binance order book chart.
“A hold above that level is symbolic and makes the rally more likely to extend, but IMO holding the 21-week MA is important for a sustained rally.” TradFi is closed Monday for MLK Day. The instability continues.”
Previous post has added the activity of these points was really helping to boost the market in the exchanges.
Meanwhile, given FTX’s loss reversal, the Stockmoney Lizards trading account called out for “a little (sideways) consolidation at current levels.
Michael van de Popp, founder and CEO of Eight trading company, said that Bitcoin may indeed rally as a result of a flag change in US Dollar strength.
The US Dollar Index (DXY) continues to trade near its lowest level since early June 2022 at 107.77.
The focus is shifting to earnings as a catalyst for stocks
This week will get off to a fast start in terms of macro data, with Producer Price Inflation (PPI) data due out on January 18.
This will come amid various speeches from Federal Reserve officials, while stocks are likely to be weighed down by another event in the form of corporate earnings reports later in the week.
As Bank of America strategists noted in a note last week, the S&P 500 has become particularly sensitive to earnings, even outpacing classic data releases like the consumer price index (CPI) in terms of impact.
“We see this as a narrative market shift from the Fed and inflation to earnings; reactions to earnings rose, while reactions to inflation data and FOMC meetings fell,” they wrote, citing media outlets including CNBC.
The strategists referred to the upcoming meeting of the Fed’s Federal Open Market Committee (FOMC), which will make a decision on raising interest rates on February 1.
According to CME Group’s FedWatch Tool, they are currently expected to be lower than any since the start of 2022, with sentiment favoring a 0.25% increase.
“The lower Fed Funds are, the more liquidity there is in the system,” wrote Ram Ahluwalia, CEO of digital asset investment adviser Lumida Wealth Management. research last week.
The accompanying chart shows that Ahluwalia suggested a beneficial relationship between low Fed funds rates and Bitcoin liquidity.
He went on to refer to veteran economist Larry Summers’ speech to the mainstream media on January 13, in which he sounded positive about declining inflation.
“Larry issued a statement saying the Fed’s fight against inflation is ‘much, much closer to being done.’ This is a ‘positive surprise’ for risk assets and supports the Fed’s core camp,” he argued.
“BTC benefits from QE hypothesis. One of the big macro tables listened and went long on bitcoin.”
GBTC’s winning streak continues
On the subject of institutional recovery, another chart that traces all of its FTX losses is the largest institutional bitcoin investment vehicle, Grayscale Bitcoin Trust (GBTC).
Coinglass data shows that as of January 13, the latest date for which data is available, GBTC shares are trading at a discount to net asset value (NAV) of 36.26%.
This discount, previously positive and known as the “GBTC premium”, has increased since late December and is now higher than at any point since the FTX collapse.
Its all-time high was just before that, when it hit 48.62% as Grayscale suffered as part of parent company Digital Currency Group’s (DCG) own FTX issues.
Those controversies continue to rage, often publicly, but GBTC is producing its most encouraging results in months.
Meanwhile, behind the scenes, Grayscale continues to battle US regulators over their refusal to convert GBTC into an exchange-traded fund (ETF) based on the spot price of Bitcoin.
A spacious one Twitter update On January 13, Grayscale’s general counsel, Craig Salm, made multiple references to the company’s “commitment” to winning its case and bringing the Bitcoin ETF to the US market in the first place.
“To reiterate, converting GBTC to Bitcoin ETF is the best long-term way for him to track his BTC value,” he concluded.
“Our case is moving forward quickly, we have strong, sound judgment and compelling legal arguments, and we are optimistic that the court should rule in our favor.”
The difficulty reaches a new story high
If Bitcoin’s price recovery wasn’t enough to cheer the bulls, its network fundamentals tell an equally encouraging story.
Roughly in line with the weekly close, the network’s mining difficulty increased by more than 10%, marking its biggest increase since last October.
The move has obvious implications for Bitcoin miners and suggests that the ecosystem is already benefiting from higher prices.
As Cointelegraph reports, miners have already been slowing the pace of selling their BTC reserves in recent weeks, while the increased difficulty reflects block subsidy competition returning to the sector.
Over the past week, however, miners’ balances have declined in response to the rapid rise in Bitcoin prices. As of January 16, they stood at 1,823,097 BTC, data from on-chain analytics firm Glassnode shows, marking a one-month low.
Despite this, difficulty has now wiped out his FTX reactions and set an all-time high in the process.
“Bitcoin is in the process of retesting the estimated average cost of production for miners,” Glassnode added. noted last week before most acquisitions.
It added that “a move above this level provides a much-needed boost to miners’ earnings.”
The accompanying chart showed its own “difficulty regression model,” which it describes as the “comprehensive cost of production for Bitcoin.”
Emotions outpace “fear” as whales buy big
It’s no secret that the average Bitcoin hodler is feeling some much-needed relief this month, but is it a case of unbridled euphoria?
Related to: 5 altcoins that could emerge if the price of bitcoin remains bullish
According to the time-honored benchmark, the Crypto Fear & Greed Index, it may be “too much, too soon” when it comes to the change in sentiment surrounding Bitcoin’s price strengthening.
On Jan. 15, the index hit its highest level since last April, and while not yet “greedy,” the move marks a big turnaround from just a few weeks ago.
As Cointelegraph reports, the crypto market has spent most of 2022 in its lowest “extreme fear” bracket, which hasn’t helped FTX.
It is now scoring above 50/100, dipping slightly into the new week to remain in “neutral” territory.
For Santiment, a research firm that specializes in measuring the atmosphere around crypto markets, there is one overriding factor influencing Bitcoin’s newfound strength, however.
The answer is: it wrote in a post on Twitter over the weekend is firmly in whale activity.
For ten days on January 15, large and small dots added to their positions, causing a chain reaction of supply and demand in the process. In total, they bought 209,700 BTC during that period.
Santiment called the data “the definitive explanation for why crypto prices have soared.”
The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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