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 rose beyond expectations this month, making January 2023 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.
This dismal turnaround is yet to bear fruit, and the coming days could turn out to be a crucial period for Bitcoin’s long-term trend.
Stimuli are in short supply. The US Federal Reserve will decide on its next rate hike this week, with Federal Reserve Chairman Jerome Powell providing a long overdue 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 prove to be the most volatile in Bitcoin’s recent 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, with Bitcoin failing 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.
At current prices, Bitcoin is still up 43.1% in January – The better January since 2013 – Bitcoin’s first famous bull market year.
Market analysts are keen to see what happens around the Federal Open Market Committee (FOMC) rate hike decision on February 1. As the ultimate source of volatility, the event can greatly affect the monthly candle, only for the Bitcoin price movement to change course immediately.
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.
“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 February 1st. What JPow says will move the markets,” he said, as part of a comment on supply and demand levels in the Binance order book Read End of this week.
Physical indicators pointed to Powell’s upcoming words at the FOMC, also indicating that supply liquidity has turned higher, causing the spot price to approach that key area.
Macro hinges on a rate hike by the Fed, Powell
The next week is set to be dominated by a Fed rate hike and accompanying comments from Powell.
In a familiar but still nerve-wracking series of events for bitcoin traders, the Federal Open Market Committee will meet on February 1.
This time around, the result may offer some surprises, with forecasts nearly 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 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. He said.
“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 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 space for asset risk across the board, including cryptocurrencies.
However, as Cointelegraph reported, many are worried that the coming year will be anything but sailing when it comes to the Fed’s policy transition. It might just happen When policy makers have no choice But to stop the economic ship from sinking.
Another comment, from former BitMEX CEO Arthur Hayes, Calls for widespread damage to risky assets Before the Fed had to change course, including the $15,000 price of Bitcoin.
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 argue.
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, but while CryptoQuant acknowledges that the situation could turn lower 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 Articles Posted next to the illustration graph.
“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 March 2020 COVID-19 market crash.
Among them is Bitcoin’s Relative Strength Index (RSI), which has now rebounded from all-time lows.
PlanB, creator of the Equity family of streaming bitcoin price prediction models, pointed out The latest bounce from the macro lows in the RSI occurred at the end of Bitcoin’s previous 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.
Meanwhile, on the lower timeframes, the amount of active supply in the last 24 hours reached 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 has become a typical case of market glut as bitcoin skyrocketed.
Related: Bitcoin Will Reach $200K Before Next Cycle $70K “Bear Market” – Forecast
according to For the classic cryptocurrency market sentiment indicator, the Crypto Fear & Greed, 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, as measured by fear and greed, sentiment wiped out losses from FTX and the Terra LUNA crash.
In a cautious reaction, a CryptoQuant contributor warned that sentiment among those who only recently entered the market now mirrors 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,” Articles Post-reading, with reference to the 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.