Bitcoin seems to be on unstable ground as February struggles to match January’s performance. The beginning of the second week in February brings a new bearish outlook for Bitcoin as previous highs are no longer being maintained.
This could potentially be a realization of predictions for a significant decline in BTC’s price as the value falls back under $23,000 and continues to decrease on hourly charts.
Although trading in Europe and the United States has not yet begun for Feb. 6, Asian markets are already experiencing a drop, and the U.S. dollar is strengthening, making it even more difficult for Bitcoin bulls.
The focus this week is on the upcoming macroeconomic data release from the Federal Reserve, with all eyes set on January’s Consumer Price Index (CPI) as the significant indicator of inflation.
As we gear up for this important event, with opinions already divided on the outcome, the financial markets could experience heightened volatility across various risk assets.
Adding to the mix, there’s growing concern that Bitcoin is overdue for a significant correction after weeks of smaller fluctuations. This creates a challenging but potentially profitable trading environment for savvy investors.
So, what’s the current state of Bitcoin, and what factors are influencing its movement? Let’s take a closer look with Crypto Tips.
BTC Price Has Been Quite A Mixed Bag This Week
Despite holding onto most of its January gains, which were a staggering 40%, there are some warning signs that a dip may be on the horizon.
Currently sitting at just below $23,000, the weekly close was disappointing as it failed to beat the previous close and was rejected at a critical resistance level from mid-2022.
According to the popular trader and analyst Rekt Capital, “BTC is currently failing its retest of ~$23400.” He went on to explain, using a weekly chart, the support and resistance zones currently in play.
He added, “It’s important for BTC to have a Weekly Close above this level for a chance at the upside. August 2022 showed that a failed retest could lead to a deeper drop within the blue-blue range.”
Traders have started to speculate on where Bitcoin’s potential drop might end. They’re also considering which levels could provide support for Bitcoin’s bullish momentum to continue.
Many of these speculations are centered around $20,000, a critical psychological number and the location of Bitcoin’s all-time high from 2017.
At the moment, data from TradingView shows that BTC/USD is trading at around $22,700. Despite this, it’s still going down during Asia trading hours.
A trader named Credible Crypto shared insights on the activity in the order book on February 5th. They observed that “some bids were filled during this recent dip (represented by the green box), but most of the remaining bids have been pulled (represented by the red box).”
“If we continue to fall, the next target is around 19-21k region for a potential bounce.”
As a seasoned crypto trader known as the “il Capo Of Crypto,” it’s crunch time when it comes to predicting market trends. Throughout January’s gains, they remained steadfast in their belief that breaking below $22,500 would signal a bearish shift in the market.
In a lively Twitter discussion, the trader shared their insights, stating that the current bear market rally has created the ideal conditions for savvy investors to buy on the dips as the trend reverses.
“This is setting the stage for a potential capitulation event in the coming weeks.”
Keeping A Watchful Eye On Fed Officials As The Market Awaits Key Updates On The Economy
This week in the world of finance, things seem to be taking a more relaxed pace compared to the intense start of February. Instead of a flurry of data, it looks like commentary from key players will set the tone.
Federal Reserve officials will be at the forefront of this commentary, including Chair Jerome Powell, who can sway markets with any subtle shifts in policy language.
Last week, we saw Powell’s words significantly impact when he repeatedly used the term “disinflation” during a speech and Q&A session following the Fed’s decision to raise interest rates by 0.25%.
With new crucial data on the horizon, analysts are buzzing about the possibility of the Federal Reserve switching from a tight monetary policy to a more accommodative approach. However, not everyone is convinced that the US economy will successfully dodge a recession as inflation slows.
Investor Andy West, the co-founder of Longlead Capital Partners and HedgQuarters, shared his thoughts in a recent Twitter thread.
He mentioned that it wouldn’t be surprising if the term “soft landing” sticks around for a bit longer before the economy experiences a sudden downturn in the third or fourth quarter of the year.
“A deeper dive suggests that it’s just business as usual, with modest interest rate increases following Powell’s recent celebration of declining inflation.
From my perspective, it seems likely that the Federal Reserve will raise interest rates by a quarter of a percentage point in their upcoming meetings in March and May,” says Caleb Franzen, a senior market analyst at CubicAnalytics, in a recent blog post.
“Of course, Federal Reserve’s next moves will heavily rely on how inflation and the overall state of the economy continue to shape up.”
Jonathan Franzen, a renowned expert in the field, recently shared his thoughts on the current state of the US economy.
He acknowledged that while the term ‘recession’ may not be entirely fitting, conditions can always take a turn for the worse. He cited three instances from the past where similar situations have occurred.
For many, the upcoming release of the Consumer Price Index (CPI) data is a hot topic of discussion. The significance of January’s numbers in supporting or refuting the current trend of declining inflation will be a key factor to watch out for.
“As we move forward after the Federal Open Market Committee meeting, we’ll be keeping a close eye on a batch of secondary economic data releases, including the highly-anticipated Institute for Supply Management’s report on services and the Non-Farm Payrolls data,” shared QCP Capital, a trading firm, in a recent update sent to their Telegram subscribers.
“Ultimately, the verdict will be determined by the Valentine’s Day Consumer Price Index, and our belief is that there’s a possibility for positive surprises in that report.”
Miner “Relief” Contrasts With BTC Sales
As the crypto market experiences ups and downs, Bitcoin continues to offer a glimmer of hope. Recent data from BTC.com shows that despite the volatility, the network’s difficulty level is holding steady at all-time highs.
While there is a slight dip predicted in the next week, the overall outlook remains promising, especially if we consider Bitcoin’s price action. The mining activity also seems to be thriving, with miners pushing the limits to outdo each other.
According to the latest information from Glassnode, a leading on-chain analytics company, Miners’ financial behavior is taking a different direction. The data suggests that miners are increasingly selling their BTC, with their reserves declining rapidly over 30-day periods.
The reserves reached their lowest point in a month on February 6th, with miners holding a balance of 1,822,605.594 BTC.
According to Philip Swift, co-founder of trading suite Decentrader, recent price movements in the crypto world has relieved miners.
He referenced the Puell Multiple, a tool used to assess the worth of newly mined BTC, which recently moved out of the “capitulation zone.” This shift suggests that miners are experiencing improved profitability and possibly less pressure to sell.
In a recent tweet, Swift stated, “It’s been 191 days of tough times for miners, but the Puell Multiple has finally given us some positive news. This means increased revenue and hopefully less selling pressure.”
Exciting Developments For Bitcoin’s NVT Signal
Despite the recent slowdown in Bitcoin price growth, some on-chain metrics are still thriving. This week, the Network Value to Transactions (NVT) signal has caught our attention, reaching levels not seen in nearly two years.
The NVT signal evaluates the value of Bitcoin transferred on the blockchain in relation to the currency’s market cap. It’s a modified version of the NVT ratio indicator, using a 90-day moving average of transaction volume instead of raw data.
The NVT signal reaching multi-year highs could be a cause for alarm – the network’s valuation seems high compared to the value being transferred, which might not be a sustainable scenario. This warning comes straight from the creator of the NVT signal, Willy Woo.
The concept of Network Value to Transactions (NVT) in Bitcoin is multi-faceted, with various interpretations leading to a complex understanding of the on-chain value in relation to price.
Charles Edwards, CEO of Capriole, a cryptocurrency investment firm, spoke about a recent adjustment to NVT known as dynamic range NVT on February 6th. He said, “Bitcoin’s NVT is pointing towards a normalization of value and the beginning of a new market cycle.”
“This message is consistent throughout history and is often a positive sign for mid-to long-term prospects, though short-term volatility is to be expected.”
Rise In Small Bitcoin Wallets Signals Trader Optimism
According to on-chain research firm Santiment, the number of smaller Bitcoin wallets has significantly increased this year. Since Bitcoin’s value crossed the $20,000 mark again on January 13th, 620,000 wallets containing no more than 0.1 BTC have emerged once more.
Santiment attributes this resurgence to the return of “FOMO” or “fear of missing out” among traders in the market. The wallet numbers growth indicates the highest activity level since November 19th, 2022.
“620,000 small Bitcoin addresses have returned to the network since FOMO made a comeback on January 13th when the price hit $20k again,” stated Santiment on their Twitter on February 6th.
“Smaller bitcoin wallet addresses holding 0.1 BTC or less have gradually increased over the past year. However, this year’s market activity suggests a resurgence of confidence among traders.”
The Crypto Fear & Greed Index gives us a glimpse into the current market sentiment, and it appears that greed is still supreme.
On January 30th, the Index reached its highest level of greed since Bitcoin hit its record-breaking high in November 2021.
