bitcoin (BTCIt begins a key week with a familiar mix of price rallies mixed with fear of a bear market resurgence.
After its highest weekly close in nearly six months, BTC/USD is still up 40% year-to-date with the monthly close just 48 hours away – can the gains continue?
Against all odds, bitcoin has surged beyond expectations this month, making January 2023 so far the best in a decade.
All the while, fears called for an imminent decline and even a new macro BTC price drop as disbelief engulfed the market.
However, this dismal turnaround is yet to bear fruit and so the coming days could turn out to be a crucial period when it comes to Bitcoin’s long-term trend.
There is no shortage of stimuli – the US Federal Reserve will decide on its next interest rate hike this week and Chairman Jerome Powell is also giving much anticipated commentary on the economy and politics.
The European Central Bank (ECB) will make the same decision the next day.
Add to that the psychological stress of the monthly close, and it’s easy to see how the coming week could be one of the most volatile in recent Bitcoin history.
Buckle up as Cointelegraph takes a look at five major issues to consider when it comes to BTC price action.
Bitcoin price is eyeing $24K with FOMC volatility expected
Bitcoin continues to challenge naysayers and shorts alike by surging higher on lower timeframes.
The weekend was no different in January, as BTC/USD hit $23,950 overnight through Jan. 30 — a new five-and-a-half-month high.
The weekly close achieved the same feat, yet Bitcoin failed to process the $24,000 mark for the eventual boom.
At the time of writing, $23,700 formed a pivot point, data from Cointelegraph Markets Pro And TradingView Show, with the US markets not yet started trading.
However, at current prices, bitcoin is still up 43.1% in January, which makes it The best month of January Since 2013 – the first famous bull year for Bitcoin.
Market analysts, meanwhile, are keen to see what happens around the Fed’s decision to raise interest rates on February 1st. As a traditional source of volatility, the event can affect the monthly candle significantly, only to completely change the price action of BTC shortly thereafter.
Maybe with a little help from the FOMC’s volatility? This is not a prediction, but it is definitely a trade setup that I would be very interested in,” noted Crypto Chase trader comment On the chart, a bounce followed by more upside is expected for BTC/USD.
This roadmap has taken Bitcoin above $25,000, which in itself is a prime target for traders — even those still wary of a mass capitulation event ending January’s exceptional performance.
Among them is Crypto Tony, which indicates that $25,000 is close to Bitcoin’s 200-week exponential moving average (EMA).
“The weekly 200 moving average is just above us at 25,000 which is as you know my target on BTC/Bitcoin.” Tell Twitter followers on Jan 29.
“Now flipping the 200 EMA and the high range into support is massive for the bulls, but we haven’t done that yet and people are already euphoric. Think about it.”
The accompanying chart still charts a possible path down towards $15,000.
As Cointelegraph mentioned Over the weekend, Il Capo of Crypto, a trader now famous for his recovery concerns, remained short of BTC.
On-chain physical indicators have identified $24,000 as an important area for bulls to flip support, along with the 50-day and 200-day simple moving averages (SMAs).
“If the bulls break $24K, expect bullish illiquidity to be exploited up to the technical resistance range ahead of the Fed’s final interest rate forecast on Feb. 1. What JPow says will move the markets,” part of the commentary on supply and demand levels in the book Binance orders Read End of this week.
Physical indicators pointed to Fed Chair Powell’s upcoming words, also indicating that supply liquidity has been shifted higher, causing the spot price to approach that key area.
Macro hinges on a rate hike by the Fed, Powell
The coming week is set to be dominated by a rate hike by the Federal Reserve and accompanying comments from Chair Jerome Powell.
In a familiar but still nerve-wracking series of events for bitcoin traders, the Federal Open Market Committee (FOMC) will meet on February 1.
The result this time around may offer some surprises, with forecasts practically unanimous in expecting a 25 basis point rise. However, the field of fluctuations around detection remains.
“The first two days of February are going to be choppy (a lot of fun),” trader and commentator Bentoshi chirp In part of the comments last week, also indicating that the Federal Open Market Committee will be followed by a similar decision by the European Central Bank the next day.
According to CME Group FedWatch toolThere is currently a 98.4% consensus that the Fed will hike 25 basis points.
This would be a further decline compared to other recent moves, and the smallest upward revision since March 2022.
“I wouldn’t be surprised if the markets pumped all week ahead of the FOMC announcements,” said Satoshi Flipper, a popular social media commentator. I continued.
“We already know he’s 25 battle points. So what’s left for J. Powell to direct? Another 25 or 50 battle points left for this year? My point is on averages: the worst is behind us now.”
If the speculators are right in assuming that the Fed will now go all-in on halting interest rate hikes, this would theoretically provide long-term breathing room for asset risk across the board, including cryptocurrencies.
As Cointelegraph continues to report, many are concerned that the coming year will be anything but sailing when it comes to the Fed’s policy transition. It may just come true, One theory states, when policymakers have no choice but to stop the economic ship from sinking.
Another, from former BitMEX CEO Arthur Hayes, calls For significant damage to risk assets before the Fed was forced to change course, including the $15,000 Bitcoin price.
Continuing the long-term warnings, Alasdair MacLeod, head of research at Goldmoney, pointed to geopolitical tensions surrounding the conflict between Russia and Ukraine as a major reason for the decline in assets going forward.
“Nobody is thinking of influencing the markets to resume the conflict in Ukraine,” he said argueprelude to an article on Goldmoney on January 29.
Macleod predicted that energy prices would “certainly go higher”, along with US inflation estimates.
“Bond yields will go up and stocks will go down,” he added.
The indicator generates the first “final buy signal” in 4 years
While a few pundits are willing to register with calling an end to Bitcoin’s latest bear market, one on-chain metric is likely to be the leader in the way.
The Profit and Loss (PnL) Index from on-chain analytics platform CryptoQuant has issued a “final buy signal” for BTC — the first since early 2019.
The PnL indicator aims to provide uniform top and bottom cycle signals using aggregated data from three other on-chain metrics. When its value rises above the 1-year moving average, it is considered a long-term buying opportunity.
This has now happened with January moving higher in BTC/USD, and while CryptoQuant acknowledges that the situation could turn bearish again, the implications are clear.
“Although the index could still fall below there, the CryptoQuant PnL Index has issued a final buy signal for BTC, which occurs when the index (dark purple line) rises above its 365-day moving average (light purple line), Written in A blog post next to the illustration.
“Historically, the index cross has signaled the beginning of bull markets.”
CryptoQuant isn’t alone in eyeing rare recoveries in on-chain data, some of which were absent throughout Bitcoin’s journey to all-time highs after the COVID-19 crash in March 2020.
Among them is Bitcoin’s Relative Strength Index (RSI), which has now rebounded from all-time lows.
like pointed out By PlanB, creator of the Stock-to-Flow family of Bitcoin price forecasting models, the recent bounce from the macro lows in the RSI indicator also happened at the end of Bitcoin’s last bear market in early 2019.
BTC miners remain disciplined
Contrary to expectations, the mass profit-taking by the average bitcoin trader has yet to begin.
On-chain data from Glassnode confirms this, with BTC supply still aging despite recent price gains.
Dormant coins in wallets of five years or more, as a percentage of the total supply, reached an all-time high of 27.85% this weekend.
The amount of accumulated or lost coins — the “big and old stash” of BTC traditionally dormant — has also reached a five-year high.
On lower timeframes, meanwhile, the amount of active supply in the last 24 hours actually hit a one-month low on January 29.
Despite this, the feeling of “greed” is quickly entering the market psyche, especially among new investors, warns the statements presented below from CryptoQuant.
The “greatest” sentiment since $69,000
Non-technical data shows that what started as disbelief as bitcoin soared quickly became a typical case of market exuberance.]
Related: Bitcoin Will Reach $200K Before Next Cycle $70K “Bear Market” – Forecast
according to Index of fear and greed in cryptographya classic cryptocurrency market sentiment indicator, the mood among bitcoin and altcoin investors is now mostly one of “greed.”
The index, which breaks down sentiment into five categories to identify potential explosive tops and irrational market bottoms, currently measures 55/100 on its normal scale.
While still far from an extreme, this result marks the index’s first trip into “greed” territory since March 2022 and the highest since Bitcoin’s all-time high in November 2021.
On January 1st, 2023, it measured 26/100 – less than half of its last reading.
However, sentiment, as measured by Fear & Greed, has now wiped out losses from FTX and the crash of Terra LUNA.
In a cautious reaction, the CryptoQuant contributor warned that sentiment among those who only recently entered the market now reflects the atmosphere of early 2021, when BTC/USD was making all-time highs on an almost daily basis.
“Sentiment from participants in the short-term Bitcoin chain (SOPR short-term) has reached its most greedy level since January 2021,” blog post Read, with reference to the Spent Production Profit Ratio (SOPR) measure.
“While SOPR above 1 indicates an uptrend, the index is now well above 1 and overextended. Without increasing stablecoin reserves on spot exchanges, the bull could quickly run out of fuel.”
Among its other uses, SOPR provides insight into when bitcoin investors might be tempted to sell after entering a profit.
The views, ideas and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.