Bitcoin starts the week with many hurdles, but with strong internal support, can it finally break old resistance below $50,000?
The correction is now approaching its third month of disappointment, but many analysts say there will soon be an opportunity to counter the bears.
With inflation a hot topic and US lawmakers set to open the bitcoin mining debate this week, there are many issues to consider.
However, it seems Bitcoin has gotten to a point where it will deliver a classic surprise when much of the mainstream economy least expects it.
The article will look at 5 notable factors to consider for BTC price action in the coming week.
Bitcoin keeps the weekly key close
Bitcoin appears uninterested in challenging local resistance levels as the week begins.
After a weekend of range swings with almost no price action, BTC is making lower lows in a short period of time, avoiding key zones around $44,000.
After the holiday, Monday brings some more before the market sets the tone.
However, Bitcoin managed to end the week at the very critical juncture identified by trader and analyst Rekt Capital as useful in supporting bullish momentum.
“Weekly close above ~$43,100 (black) would be a good sign to confirm Bitcoin continues to move higher from here. With the black line turning into support on the weekly chart, BTC will re-enter the ~43,100 – $51,800 range.”
BTC/USD Chart | The source: rect capital
The subsequent price drop pushed the largest cryptocurrency lower, with $42,337 on Bitstamp at press time being Monday’s local bottom.
Trader Crypto Ed is also cautiously optimistic, eyeing the possibility of a repeat of last week’s rally above $44,000. However, it should be noted that after reaching this level, the price fell again.
“While it’s early this looks like the start of the continuation of last week’s move. Good luck!” he summed it up To update his latest.
Meanwhile, sentiment favors a bullish breakout due to the current range trading.
US Congress Discusses Crypto Mining Sweeping
Amid a flurry of fresh headlines about how inflation is affecting consumers, the highest consumer price index (CPI) in 40 years has won President Joe Biden’s approval.
Follow forecast by Goldman Sachs last week that if annual CPI gains are capped at 7%, the Federal Reserve could make at least four major rate hikes in 2022. This puts further pressure on these frustrated consumers.
“The course will be set in the coming weeks,” said Pentoshi arguments.
Closer to home this week, US lawmakers will discuss the environmental impact of cryptocurrency mining.
With a significant portion of the Bitcoin hashrate now coming from the US, any hostile politics will deal a serious blow to sentiment. Not everyone attending the space is welcome to follow the path of exodus caused by China’s May 2021 ban and its impact on hashrate and network security.
The hashrate is now back at an all-time high, fully recovering from last year’s events.
The Oversight and Investigative Subcommittee Hearings will take place on Thursday entitled “Sweeping Cryptocurrencies: The Energy Impact of Blockchain”.
The hearing will be broadcast live in real time during the day.
Bitcoin – “An Oil Filled Fire”
Bitcoin’s volatility is falling to multi-year lows – encouraging for its adoption as a mainstream asset, but not something many expect to last.
Follow index Bitcoin Volatility, which calculates the standard deviation of daily BTC returns for the past 30 and 60 days, is Bitcoin’s least volatile since November 2020 at 2.63%.
As a result, the current price action is similar to how it was before BTC began exploring after it broke its 2017 all-time high of $20,000.
Volatility index chart of Bitcoin | The source: Buy bitcoin worldwide
For trader, entrepreneur and investor Bob Loukas, the stage is now being set for a repeat of these events.
“Remember when people bought BTC options for the super cycle in September/October. Maybe more than 80% discount. The declining volume speaks for a consolidation phase, a similar period that could lead to a move like the 20th October. But think there is still time to ponder in this BTC range,” he commented, noting that derivatives traders are likely to be disappointed ahead of the current all-time high of $69,000.
Remember when everyone was charging BTC options for the super cycle in September/October. These are probably down 80+%.
Vol speaks of a consolidation phase, likely a similar earnings phase, leading to the Oct. 20 move. But still think about the time to grind in this BTC area. pic.twitter.com/nQGWfu2nMF
— Bob Loukas (@BobLoukas) January 15, 2022
While “interesting” price moves are yet to resurface after December’s drop, they are now more likely given Bitcoin’s increasingly inaccessible supply.
Market commentator Johal Miles arguments:
“With illiquid supply at ATH for this cycle, Bitcoin is essentially oiled fire. Even the slightest need will bring forth raging flames.”
BTC is cold stored out of the control of speculators.
Retail investors have been silent since early 2021
Amid questioning the absence of retail investors even after the 40 percent price drop, new data shows they haven’t been very keen on Bitcoin all year.
Watch out for new entities appearing on the blockchain, Glassnode analyst TXMC Trades shows How quiet is bitcoin really in terms of retail adoption as of January 2021?
Observing the 30-day exponential moving average (EMA) of new on-chain units shows that the last major surge ended in early Q1 of last year.
Since then, despite two new all-time highs, the number of new companies has declined, returning to the standard levels typically seen after the peak of a bull cycle.
TXMC explained on Twitter:
“Bitcoin bull/bear markets have different on-chain activity profiles. In terms of activity, the last bull run ended in January 2021. It’s been quiet since then.”
Bitcoin New Entity Chart (30-day EMA) | Source: TXMC Trades
The data shows that the average investor has been neglecting Bitcoin even as it is making new highs and institutional activity remains strong.
This also proves the keen interest of Google users, with the rate of searches for “bitcoin” around the world remaining at the same level as December 2020.
While not threatened at current prices, miners are also receiving less transaction fee revenue than at any point since late 2020 – just 1.08%.
“This is an indicator that retail hasn’t joined… Although prices are really comparable to early 2021. When are they coming back?”, on-chain analyst Blockwise wonder later this week and present more data on Glassnode.
Bitcoin Miner Transaction Fee Revenue Percentage Chart (7-Day MA) | Source: block by block
Bitcoin’s “extreme fear” in the new year continues, and if on-chain behavior continues, it will remain the dominant force in sentiment.
The situation has never been grimmer, according to the Fear and Greed Index, which measures market sentiment using multiple factors to gauge how traders are likely to trade at a given price.
The index has been showing “extreme fear” since the end of December and so far no course change has been able to shake it.
Ditto for the week, with a Fear and Greed Index of 21/100 – in the extreme fear zone.
Cryptocurrency Fear and Greed Index | Source: alternative.me
Likewise, the real win/loss ratio shows the shyness of traders with low profit opportunities.
Such behavior is common during bearish times and was seen last summer when BTC/USD fell and bottomed around $30,000.
Bitcoin Real Profit/Loss Ratio | Source: On-Chain College
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