BTC metrics come out of capitulation 5 things to know about Bitcoin this week

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Bitcoin (BTC) starts the last week of January in great shape after sealing its highest weekly close in five months.

Despite the opposition, the biggest cryptocurrency retains its newfound strength and continues to surprise market participants.

It’s no small feat that market sentiment has enough to spook him and initiate an overhaul among investors. Macroeconomic conditions remain uncertain, while within Bitcoin, research has highlighted whales on exchanges that could artificially move prices with huge amounts of liquidity.

Nonetheless, Bitcoin has seen its most impressive percentage gains in over a year, and hope remains that the good times will continue. What could it depend on?

Cointelegraph takes a look at some of the key factors to keep in mind as a unique January draws to a close.

Bitcoin analysts expect a ‘sequel’ to come

It’s no secret that Bitcoin faces its fair share of suspicion as it offers 40% gains on just three weekly candles.

Demands for a major correction and continuation of the bear market have long been public, and some of the more conservative trade voices insist that the macro lows are not here yet.

However, this inflection point has yet to materialize. On its last weekly candle close, BTC/USD was trading just above $22,700, marking its best performance since last summer.

Subsequently, the pair consolidated at the start of Monday, also retaining the ground recovered during the week.

The swept lows, the juicy highs above, would be the perfect time to set up a nice flat run before continuing, the Credible Crypto trader summed up the short-term outlook.

Credible Cryptos are characteristic of some of the most bullish positions in the market, less concerned with the idea that the whole move could just be a relief rally within a larger bearish structure.

Total market capitalization has crossed the 200-day EMA, Cointelegraph contributor and CEO of trading firm Eight, Michal van de Poppe, also bullish, added over the weekend, referring to exponential moving averages.

Good signs for the crypto as continuation looks likely. Between continuation at $25,000 or correction at $19,500. To continue -> hold above the 200 day EMA and break the resistance. Potential entry point 200-day EMA.

The 200-day EMA stood at $21,056 at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.

BTC/USD 1-day candle chart (Bitstamp) with 200EMA. Source: Trading View

More cautious assessments of the situation focused, among other things, on the composition of the stock market’s order book.

In its latest analysis, Material Indicators noted that BTC price action rose and fell as the main area of ​​supply liquidity moved back and forth on Binance.

The BTC buy wall at 20,200 was moved to push the price higher to test resistance at the trendline, according to part of the commentary.

I don’t trust this $22,000 entity any more than I do $20,000, but I’m happy to trade in their wake. BTC/USD order book data (Binance). Source: Materials Indicators/Twitter

Another post doubled down on an earlier claim that the price action was choreographed and paid no attention to surrounding industry news, including the bankruptcy of crypto lending company, Genesis Trading.

Basically, nothing has changed, but BTC is testing resistance at the macro level. Meanwhile, some of the biggest crypto institutions are heading for bankruptcy. Probably nothing, Material Indicators tweeted.

Macro optimism returns

Macro analysis shows a similar divide among those involved in the crypto markets themselves.

With the U.S. Federal Reserve’s latest decision on interest rate hikes scheduled for Feb. 1, sources view lower inflation in increasingly divergent ways.

Meanwhile, the 2023 World Economic Forum, despite some crypto opposition, failed to significantly shake sentiment.

For Dan Tapiero, founder and CEO of 10T Holdings, it’s just a matter of how bullish risk assets will react to tidal shifts from the Fed as it eases monetary policy going forward.

How will the Fed react when inflation drops below 0? A long and happy year ahead for BTC ETH gold, he told Twitter followers.

The USD is bearish and the 10yr below 3% to support major trends. The digital asset ecosystem (DAE) must thrive as equilibrium prices are reached without government support. Free markets work!

This stance is obviously different from some other popular takes, especially last week’s predictions from former BitMEX CEO Arthur Hayes. The Fed’s pivot on rates, he warned, will lead to disastrous losses for the crypto before the recovery takes hold.

Credible Crypto, meanwhile, also sees no reason not to be bullish on risk assets now.

Talks about rate hikes slowing to 25bps as inflation declines for 6 straight months, while the $SPX has made a perfect retest of the previous ATH and looks set to rally. All this panic and fear, why? he asked on January 23.

S&P 500 annotated chart. Source: Credible Crypto/Twitter

The last week of the month meanwhile contains various potential short-term market triggers in the form of US macro data releases.

These include GDP growth on January 26 and the personal consumption expenditure (PCE) index on January 27.

DXY fades as support not found

On a related macro note, particular attention arguably deserves to be paid to the fate of the US dollar this week.

As crypto markets rally, the strength of the dollar is tumbling, rapidly losing the ground gained during its ascent to twenty-year highs last year.

The US Dollar Index (DXY) is generally inversely correlated to the performance of risky assets, and Bitcoin has proven particularly sensitive to major moves.

Currently, DXY is trading around 101.7, having tested 101.5 six-month lows for the second time this week. After having lost it as support at the end of November, the 200-day moving average of the indices has since acted as resistance.

It doesn’t take much else to tell you what happens next. The biggest short-term market ever is upon us, said crypto entrepreneur and commentator Coosh Alemzadeh alongside a chart comparing DXY performance to Bitcoin and Nasdaq over the weekend.

The dollar’s decline against Chinese bonds also caught the attention of popular analyst TechDev, who showed that impulsive moves in Bitcoin peak within a year of a key level being hit on Chinese ten-year bonds. .

Caleb Franzen, Principal Market Analyst at Cubic Analytics, added new multi-month lows for the DXY US Dollar Index, after being perfectly rejected on the horizontal support/resistance range and the 200-day moving average cloud. .

This rejection was when I realized and accepted that the momentum was biased downward. One-day candle chart of the US Dollar Index (DXY) with 200MA. Source: TradingViewOn-chain metrics rise from the abyss

Bitcoin is truly in the midst of a renaissance, on-chain data is ending.

Compiled by analytics firm Glassnode, several classic indicators of Bitcoin market health are now breaking out of their capitulation zones.

These include perhaps unsurprisingly given the 40% upward move this month, the amount of BTC supply held at a profit and a loss.

The Unrealized Net Income (NUPL) is now off its lower bound and heading for better profitability, although it notably hasn’t fallen as low as in previous bear market lows.

Bitcoin Net Unrealized Profit/Loss (NUPL) chart. Source: Glassnode

As Glassnode confirms, this applies equally to short-term incumbent (STH) and long-term incumbent (LTH) NUPL. The two categories of Bitcoin investors are described as entities holding coins for less or more than 155 days, respectively.

Similarly, the market value of Bitcoins is bullish against the realized value Z-score (MVRV-Z), which measures the ratio of the difference between market capitalization and realized capitalization, and the standard deviation of all historical data. of market capitalization, i.e. (realized market capacity) / std (market capitalization), or when Bitcoin is over/undervalued compared to its fair value. as Glassnode explains.

MVRV-Z has now exited its undervalued green zone for the first time since a brief spike in early November, also marking its first such move since the FTX debacle.

MVRV Z-Score has just moved out of the green accumulation zone, Decentrader trading suite co-founder Philip Swift confirmed last week.

Bitcoin MVRV-Z scoreboard. Source: GlassnodeBitcoin mining hash rate, difficulty at all-time highs

It’s already time for another bitcoin network difficulty adjustment, and this week should preserve the existing all-time highs.

Related:Bitcoin Due for Another “Big Rally” as RSI Copies 2018 Bear Market Recovery

According to BTC.com estimates, the difficulty will increase by around 0.5% in six days.

Overview of the fundamentals of the Bitcoin network (screenshot). Source: BTC.com

This will add icing on the cake to an already changing mining sector. Despite recent low prices, competition among miners has increased this month, adding pressure to those unable to keep costs down.

Glassnode also shows that compared to thirty days ago, miners are holding less BTC overall. It was around this time that the price gains started to materialize.

Bitcoin miner net position change chart over 30 days. Source: Glassnode

Raw data from MiningPoolStats meanwhile places the Bitcoin hash rate an estimate of processing power dedicated to mining also at new all-time highs.

Bitcoin hash rate raw data table (screenshot). Source: MiningPoolStats

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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