BTC ‘likely’ to repeat Q4 2020 move – 5 things to watch in Bitcoin this week

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Bitcoin (BTC) enters a new week facing multiple hurdles but strong internal support – can former resistance below $50,000 finally fall?

A corrective event now almost in its third month is frustrating many, but the conditions may soon be right for a fresh charge against opportunistic bears, according to a growing number of analysts.

With inflation on the rise and US lawmakers set to go public with the Bitcoin mining debate this week, there are many potential pitfalls to be expected.

Nonetheless, it’s starting to feel like Bitcoin is at the point where it’s capable of delivering a classic surprise when the majority of mainstream economics least expects it.

Cointelegraph takes a look at five factors to pay attention to when charting BTC price action over the coming week.

Bitcoin Holds Key Weekly Close Level

Bitcoin seems decidedly uninterested in tackling even local resistance levels at the start of the week.

After a limited weekend with little unique price action, BTC/USD is setting lower lows for short periods while avoiding key areas around $44,000.

With Wall Street closed for a holiday, Monday could turn to offer more of the same before the markets give direction.

Bitcoin, however, managed to end the week at exactly the crucial point identified by trader and analyst Rekt Capital as helpful in fostering bullish momentum.

“A weekly close above ~$43,100 (black) would be a good confirmation sign for BTC to continue higher from here,” he wrote alongside a price chart on Sunday. accompaniement.

“Turn black into support on the weekly, $BTC would confirm a re-entry into its range ~$43100 – $51800.” BTC/USD annotated chart. Source: Rekt Capital/Twitter

A subsequent drop saw the largest cryptocurrency drop to $42,337 on Bitstamp the local floor for Monday at the time of writing.

Another popular trader, Crypto Ed, is also cautiously optimistic.

“Although it’s early days, but it looks like the start of last week’s movement continuation. Fingers crossed!” he summed up in part of his latest Twitter update.

Last week, meanwhile, Cointelegraph reported sentiment favoring an upside breakout as a possible result of the current range behavior.

Congress to Discuss “Cleaning Up” Cryptocurrency Mining

The “stage is set” in more ways than one this week as the subject of inflation returns to haunt US markets and politics.

Amid a fresh wave of headlines about how inflation is hitting consumers, the highest consumer price index (CPI) in 40 years is already reaching President Joe Biden’s approval ratings.

By curbing the CPI’s 7% year-on-year rise, the Federal Reserve could adopt as many as four key rate hikes in 2022 alone, Goldman Sachs predicted last week. This in turn puts more pressure on weary consumers.

“The stage is being set in the coming weeks,” Pentoshi explained.

Closer to home, this week US lawmakers will discuss the alleged environmental impact of cryptocurrency mining.

With a significant portion of the Bitcoin hash rate now coming from the United States, any hostile politics will matter more than most when it comes to sentiment. A repeat of China’s exodus from May 2021 – and its ripple effect on hash rate and network security – will not be welcomed by anyone.

The hash rate, as Cointelegraph noted, is now back to all-time highs, fully recovered from the events of the past year.

The Oversight and Investigations Subcommittee hearing is scheduled for Thursday and is titled “Cryptocurrency Cleanup: The Energy Impacts of Blockchain.”

The hearing will be broadcast live in real time the same day.

Bitcoin “a gasoline-covered bonfire”

Bitcoin’s volatility is hitting multi-year lows — encouraging for its acceptance as a mainstream asset, but not something many expect to last.

According to the Bitcoin Volatility Index, which calculates the standard deviation of daily BTC returns for the past 30 and 60 days, Bitcoin is the least volatile since November 2020 at 2.63%.

The current price movements are therefore similar to those before BTC/USD entered price discovery after hitting its all-time high of $20,000 since 2017.

For trader, entrepreneur and investor Bob Loukas, the stage is now set for a possible repeat of these events.

“Remember when everyone was loading BTC options in September/October for the super cycle. These are probably down more than 80%,” he commented, noting that derivatives traders ahead of the current all-time highs of $69,000 are likely more than disappointed.

“The drop in volume speaks to a period of consolidation, likely a period of similar earnings leading up to the October 20 move. But think there is still time to grind in this BTC range. “Bitcoin Volatility Index Chart. Source: Buy Bitcoin Worldwide

Although the “exciting” price moves have yet to reappear after the December drop, they are now all the more likely as Bitcoin’s supply becomes increasingly inaccessible.

“With illiquid supply at ATH for this cycle, Bitcoin is essentially a bonfire covered in gasoline,” said market commentator Johal Miles.

“The slightest puff of demand will bring roaring flames.”

As Cointelegraph reported, BTC is being evacuated to cold storage out of the grasp of speculators.

Interest “quiet since” early 2021

Amid questions about the absence of retail investors even after a 40% price drop, new data shows that the industry has actually had little interest in Bitcoin for an entire year.

Watching new entities appear on the blockchain, Glassnode analyst TXMC Trades showed just how quiet Bitcoin really has been in terms of retail adoption since January 2021.

A look at the 30-day exponential moving average (EMA) of new entities entering the chain reveals that the last major surge ended early in the first quarter of last year.

Since then, despite two new all-time highs in price, the number of new entities has fallen and returned to the standard rates normally seen after the bull cycle peaks.

“Bitcoin bull/bear markets have a distinct on-chain activity pattern,” TXMC explained on Twitter.

“…From an activity perspective, the last bull run ended in January 2021. It’s been quiet since.” Chart of new bitcoin entities (30-day EMA). Source: TXMC Trades/Twitter

The data underscores how the average investor has all but forgotten about Bitcoin, even as it hit new highs and institutional activity remained strong.

Interest levels from Google users add to the trend, with search rates for “Bitcoin” around the world at levels that were previously the norm in December 2020.

Global Google search data for “Bitcoin”. Source: Google Trends

Miners, while far from underwater at current price levels, are also earning less revenue from transaction fees than at any time since the end of 2020 – just 1.08%.

“It’s an indicator that retail is not there yet…Although the price is really similar to the start of 2021 When is retail?” Twitter-based on-chain analyst Blockwise interviewed over the weekend, presenting further Glassnode data.

Annotated chart of Bitcoin miner transaction fee revenue percentage (7-day MA). Source: Blockwise/ Twitter Be Afraid, Be “Extremely” Afraid

The Bitcoin New Year “extreme scare” continues – and if on-chain behavior is anything to go by, it should remain the dominant sentiment force.

Related: Top 5 Cryptocurrencies to Watch This Week: BTC, NEAR, ATOM, FTM, FTT

According to the Crypto Fear & Greed Index, which measures market sentiment via a basket of factors to gauge how likely traders are to act at a given price, things have rarely looked gloomier.

Since late December, the index has called the status quo “extreme fear” and so far no price change has managed to alter it.

The same is true this week, with Fear & Greed at 21/100 – well into the “extreme fear” bracket.

Crypto fear and greed index. Source: Alternative.me

Likewise, the data covering BTC moved for profit or loss shows the timidity of traders, with little profit to be seen.

Such behavior is common during price declines and was seen last year over the summer as BTC/USD fell and bottomed around $30,000.

Annotated graph of the profit/loss ratio achieved by Bitcoin. Source: College on Chain / Twitter

“This is the true index of fear and greed,” commented the popular On-Chain College Twitter account, uploading the data, which comes from Glassnode’s realized profit-loss ratio indicator.

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