Best January since 2013? 5 things to know in Bitcoin this week
Bitcoin (BTC) kicks off a key week with a familiar cocktail of price spikes mixed with fears of a bear market return.
After sealing its highest weekly close in nearly six months, BTC/USD remains up over 40% year-to-date, with the monthly close just 48 hours away – can the gains hold?
Against all odds, Bitcoin has rallied beyond expectations this month, making January 2023 the best in a decade.
Throughout, concerns have called for an imminent fall and even new macro BTC price declines as disbelief swept the market.
The gloomy reversal has yet to materialize, and the coming days may yet prove to be a crucial period for Bitcoin’s long-term trend.
The catalysts are hardly in short supply. The US central bank will decide on its next interest rate hike this week, with Fed Chairman Jerome Powell giving much-anticipated comments on the economy and policy.
The European Central Bank (ECB) will make the same decision a day later.
Add to that the psychological pressure of the monthly close, and it̵[ads1]7;s easy to see how the coming week could be more volatile in Bitcoin’s recent history.
Buckle up as Cointelegraph takes a look at five key issues to consider when it comes to BTC price action.
Bitcoin price sees $24K with FOMC volatility predicted
Bitcoin continues to defy naysayers and shorts alike by spiking ever higher on lower time frames.
The weekend proved no different to others in January, with BTC/USD reaching $23,950 overnight on January 30 – a new five-and-a-half-month high.
The weekly close achieved the same feat, with Bitcoin failing to crack the $24,000 mark for a final resurgence.
At the time of writing, $23,700 formed a focal point, data from Cointelegraph Markets Pro and TradingView showed, with US markets yet to begin trading.
At current prices, Bitcoin is still up a staggering 43.1% in January – the best January since 2013 – Bitcoin’s first well-known bull market year.
Market analysts are eager to see what will happen around the Fed’s rate hike decision at The Federal Open Market Committee (FOMC) on February 1. A definitive source of volatility, the event could significantly affect the monthly candle, only for BTC price action to change tack immediately.
“Maybe with a little help from FOMC volatility? Not a prediction, but certainly a trade setup I’d be very interested in,” popular trader Crypto Chase commented on a chart predicting a retracement followed by further upside for BTC/USD.
That roadmap took Bitcoin above $25,000, itself a key target for traders — even those who remain wary of a mass capitulation event extinguishing January’s extraordinary performance.
Among them is Crypto Tony, which notes proximity of $25,000 to Bitcoin’s 200-week exponential moving average (EMA).
“The 200 Weekly EMA sits right above us at 25,000, which as you know is my target on BTC/Bitcoin,” he told Twitter Followers Jan 29.
“Turning the 200 EMA and range high into support is huge for the bulls, but we have yet to do this and people are already euphoric. Think about it.”
An accompanying chart still indicates a potential downside path towards $15,000.
As Cointelegraph reported over the weekend, Il Capo of Crypto, the trader now known for his concerns about the mining, remains short BTC.
Continuing analysis resource on the chain Material Indicators defined $24,000 as a key zone for bulls to turn for support, along with the 50-day and 200-day simple moving averages.
“If bulls breach $24,000, expect upside illiquidity to be leveraged up to the range of technical resistance ahead of Feb. 1 Fed EoY terminal rate estimate. What JPow says will move markets,” it said, as part of a commentary to the bid and sell levels in the Binance order book. read this weekend.
Material indicators referred to Powell’s upcoming words at the FOMC, and also noted that bid liquidity had moved higher, leading the spot price to move closer to that key area.
Macro depends on Fed rate hike, Powell
The coming week is set to be dominated by the Federal Reserve’s interest rate hike and related comments from Powell.
In a familiar but still unnerving turn of events for Bitcoin traders, the FOMC will meet on February 1st.
This time around, the result may offer few surprises, with expectations almost unanimous in predicting a 25-basis-point hike. Nevertheless, there is still room for volatility around the unveiling.
“The first two days of February are going to be volatile (lots of fun),” trader and commentator Pentoshi tweeted last week, and also noted that the FOMC would be followed by a similar decision from the European Central Bank a day later.
According to CME Group’s FedWatch Tool, there is currently a 98.4% consensus that the Fed will hike by 25 basis points.
This would be a further reduction compared to other recent moves and the smallest upward adjustment since March 2022.
“Wouldn’t be surprised if the markets pumped all week before the FOMC announcements,” popular social media commentator Satoshi Flipper so.
“We already know it’s 25 BP. So what is even left for J Powell to provide guidance on? Another 25 or 50 BP left for the year? My point is about prices: the worst is now behind us.”
Should speculators be correct in assuming that the Fed will now trend toward halting interest rate hikes altogether, this would theoretically provide long-term breathing room for risk assets across the board, including crypto.
But, as Cointelegraph reported, many are worried that the coming year will be anything but usual when it comes to a Fed policy transition. That can only happen when politicians have no choice but to stop the economic ship from sinking.
Another comment, from former BitMEX CEO Arthur Hayes, calls for widespread damage to risk assets before the Fed is forced to change course, including a BTC price of $15,000.
Continuing the longer-term warnings, Alasdair MacLeod, head of research at Goldmoney, referred to geopolitical tensions surrounding the Russia-Ukraine conflict as a key future downside risk factor.
“No one is thinking through the effect on the markets of the resumption of the Ukraine conflict,” he argued.
MacLeod predicted that energy prices would “certainly move higher”, along with US inflation projections.
“Bond yields will rise, stocks will fall,” he added.
The index generates the first “definitive buy signal” in 4 years
While few pundits are willing to go on the record to end the latest Bitcoin bear market, one chain value is potentially leading the way.
The Profit and Loss (PnL) index from on-chain analytics platform CryptoQuant has issued a “definite buy signal” for BTC – the first since early 2019.
The PnL index aims to provide normalized cycle peak and trough signals using combined data from three other chain metrics. When the value rises above the one-year moving average, it is taken as a long-term buying opportunity.
This has now happened with January’s rise in BTC/USD, but while CryptoQuant acknowledges that the situation could turn bearish again, the implications are clear.
“While it is still possible for the index to fall back below, the CryptoQuant PnL Index has provided a definitive buy signal for BTC, which occurs when the index (dark purple line) climbs above its 365-day moving average (light purple line),” wrote it in a blog post together with an explanatory diagram.
“Historically, the index crossing has signaled the beginning of bull markets.”
CryptoQuant is not alone in seeing rare recoveries in on-chain data, some of which were absent throughout Bitcoin’s ride to all-time highs following the March 2020 COVID-19 market crash.
Among them is Bitcoin’s Relative Strength Index (RSI), which has now rebounded from its all-time lows.
PlanB, creator of the stock-to-flow family of Bitcoin price forecasting models, noted that the last pullback from macro lows in the RSI occurred at the end of Bitcoin’s previous bear market in early 2019.
BTC hodlers remain disciplined
Contrary to expectations, mass profit-taking by the average Bitcoin holder has yet to begin.
On-chain data from Glassnode confirms this, with BTC supply continuing to age despite recent price increases.
Coins that have been dormant in wallets for five years or more, as a percentage of total supply, hit new highs of 27.85% this weekend.
The amount of hodled or lost coins – “big and old stashes” of BTC traditionally dormant – has also reached its highest level in five years.
Meanwhile, on lower time frames, the amount of supply last active in the past 24 hours hit a one-month low on January 29.
Despite this, a sense of “greed” is quickly entering the market psyche, especially among recent investors, warns data below from CryptoQuant.
Feeling “greediest” since $69,000
What began as disbelief became a textbook case of market exuberance as Bitcoin surged, non-technical data shows.
Related: Bitcoin Will Reach $200K Before $70K “Bear Market” Next Cycle — Forecast
According to the Crypto Fear & Greed Index, the classic crypto market sentiment indicator, the sentiment among Bitcoin and altcoin investors is now predominantly one of “greed”.
The index, which divides sentiment into five categories to identify potential blow-off tops and irrational market bottoms, currently measures 55/100 on its normalized scale.
While still far from its extremes, this score marks the index’s first foray into “greed” territory since March 2022 and the highest since Bitcoin’s November 2021 record.
On January 1, 2023, it measured 26/100 – less than half of the last reading.
Still, measured by fear and greed, sentiment has erased losses from the FTX and Terra LUNA meltdowns.
In a cautious reaction, a CryptoQuant contributor warned that the sentiment among those who have only recently entered the market now mirrors the atmosphere of early 2021 when BTC/USD made new records on an almost daily basis.
“Sentiment of Bitcoin short-term on-chain participants (short-term SOPR) has reached the greediest level since January 2021,” said a blog post referring to the used output profit ratio (SOPR) calculation.
“While SOPR trending above 1 indicates a bullish trend, the indicator is well above 1 right now and far too stretched. Without an increase in stablecoin reserves on spot exchanges, the bull fuel could run out quickly.”
Among other uses, SOPR provides insight into when Bitcoin investors may be more inclined to sell after entering profits.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.