Illiquid supplies “go up mercilessly” – 5 things to see in Bitcoin this week
Bitcoin (BTC) starts the last week of January in a place no one wanted, but many warned about – a 50% reduction from all-time highs.
A flight to $ 34,000 means that BTC / USD has now been halved in just two months, and perhaps naturally enough, the worries are that the losses may continue.
With $ 30,000 so far unchallenged, Bitcoin remains slightly above the bottom of the decline from $ 58,000 to $ 29,000 last summer.
With macro markets facing a tough time due to rapidly changing US Federal Reserve policies, crypto holders will see the correlation of coins to traditional assets going forward. Can Bitcoin break the trend?
So far, there are few signs that a significant recovery is in place, but under the headlines is not everything as it seems when it comes to Bitcoin̵[ads1]7;s strength.
Cointelegraph presents a look at five areas worth noting this week when considering what might be next for BTC pricing.
Bitcoin is approaching a “generational bottom”
Bitcoin bears did not notice trading outside of opening hours on Wall Street, with the weekend ushering in a new round of losses.
From $ 39,000 to the current low of $ 34,000, BTC showed no mercy as liquidations increased and sentiment was beaten again.
Now, of course, traders are looking at a $ 30,000 test as a more definitive representation of how Bitcoin is likely to perform in the short to medium term.
Other estimates for where some relief may occur in the past were $ 33,000 and $ 31,500, these have also not yet been reached.
Dylan LeClair, senior analyst at UTXO Management, analyzed various aspects of the chain situation, highlighting Bitcoin’s current cost base as a potential clue to what he calls a “generational bottom.”
Cost basis refers to the total price at which Bitcoin from various groups of investors was last moved. The calculation, when combined with other data, can provide an insight into where a Bitcoin bear phase is likely to end up.
At the moment, the cost basis for the network is $ 24,000. The ratio between cost basis and price, known as market value to realized value (MVRV), also has further room to fall before it enters its own classic floor signal.
Current MVRV ratios are in the 38th percentile of historical readings.
In the past $ BTC fall below the realized price (MVRV below 1.0) has served as a generational purchase opportunity.
There are some who can guess if we will get to 24k, but it would certainly be extremely attractive to buy.
8 / pic.twitter.com/sW35OEt0I4– Dylan LeClair (@DylanLeClair_) January 24, 2022
Closer to home and a familiar target for BTC / USD emerges in the form of a CME futures gap.
While a week to just over $ 36,000 on Friday spoiled the possibility for Bitcoin to regain levels closer to $ 40,000 as part of a “gap filling”, a lower gap from July remains at around $ 32,000.
“The actual price action will take place at the beginning of the new week, when futures open and CME starts trading,” Cointelegraph contributor Michaël van de Poppe forecast.
Futures “gaps” refer to the empty space on CME Group’s futures chart between the end of trading on Friday and the start of the following Monday. If the spot price moves in the intervening period, it has a habit of going back to “fill in” the gap, this often happens within days or even hours.
Spotlight on RSI
This weekend, the Cointelegraph reported on Bitcoin’s daily relative strength index (RSI), which is approaching its lowest levels since the coronavirus crash in March 2020.
Well below even its classic “oversold” zone, the RSI is now becoming one of the most compelling signals for analysts concerned about believing in a downturn in the market.
Bitcoin daily RSI at its lowest since March 12, 2020 (covid crash)
– Will Clemente (@WClementeIII) January 22, 2022
Not just daily, but weekly RSI is now de facto back where it fell to almost two years ago. Then those who followed earned big, as the next year saw virtually unrestrained BTC price gains.
RSI refers to how overbought or oversold an asset is at a given price point, and the current low measurements thus give weight to the idea that $ 35,000 does not accurately reflect the value of Bitcoin.
For the popular Twitter trader and analyst TechDev, the numbers are stacked up, with RSI on the weekly chart within a hair of classic reversal zones from earlier in Bitcoin’s history.
Current #BTC weekly RSI: 37
All bear bottoms: 29-35
Crash in March 2020: 35
Closer to a bottom than a top imo. GN all. pic.twitter.com/MzyLNnJ6IT
– TechDev (@ TechDev_52) January 23, 2022
“Monthly RSI is approaching levels that have historically been some of the best buying opportunities in its entire history,” while analyst Matthew Hyland added next to a separate chart.
At both higher and lower time frames, the Bitcoin RSI suggests that current price levels are unsustainable.
Miners hold on … so far
Another phenomenon that can subtly flag $ 35,000 Bitcoin as a red herring is miners’ sales – or lack thereof.
With 50% below all-time highs, BTC / USD is now within large estimates of global production costs for the recovery of a single Bitcoin.
These range from around $ 34,000, as Cointelegraph reported, to $ 38,000, according to recent estimates, including that of cryptocurrency retailer Galaxy Digital.
Looking at data covering movements from mining pools and known miners’ wallets, however, it seems that despite presumably low or even negative profit margins, miners are not in the mood to sell their BTC holdings.
A significant accumulation trend that started last year thus shows no signs of reversing – yet.
Miners do not sell #Bitcoin
Do they know something we do not know …? #BTC pic.twitter.com/csaE5y6hQJ
– Plan © ️ (@TheRealPlanC) January 22, 2022
Nevertheless, not everyone is convinced that the status quo can withstand the storm if the spot price continues to decline.
“The worst dumps #Bitcoin has ever had were due to the miners ‘capitulation (Dec 2018, March 2020), when BTC fell below production costs, it is in danger of miners’ capitulation,” the popular Twitter account Venturefounder repeated over the weekend.
“BTC was in danger of mining capitulation at $ 30k in June and now in danger again at $ 34k.”
He included the latest incarnation of the Bitcoin production cost indicator from Charles Edwards, CEO of the crypto-investment company Capriole.
The supply of illiquid continues to grow
While concerns focus on whether certain groups of Bitcoin market participants will sell and at what price, it pays to zoom out, says an analyst.
Analyzing The overall BTC offering this weekend, Lex Moskovski, Investment Manager at Moskovski Capital, drew attention to the ongoing trend of coins becoming increasingly unavailable.
The spot price is moved aside, more and more of the offer is transferred to cold storage, shows the accompanying data from Glassnode.
In January, despite the downward trend, the conversion of Bitcoin into illiquid actually accelerated, underscoring investors’ desire to buy at price levels seen in recent weeks. Selling, it seems, is the last thing on their minds.
“Fanick if you feel like it, but Bitcoin’s illiquid supply is increasing relentlessly,” Moskovski predicted.
At the beginning of this month, Glassnode estimated it 76% of the supply was already illiquid. In December, about 100,000 BTC became illiquid each month, further findings claimed.
“The only thing that is noisy is the summer doll,” Moskovski added about the upheaval in supply that followed the relocation of miners last May.
Sentiment indexes a hair from historical downturns
With all the downsides, it’s probably not surprising that the Bitcoin market sentiment is not yielding good results.
Related: Top 5 cryptocurrencies to watch this week: BTC, LUNA, ATOM, ACH *, FTM
According to the latest data from the Crypto Fear & Greed Index, “extreme fear” only gets worse with the spot price performance.
Earlier this month, the Cointelegraph reported that the index reached its lowest levels only a handful of times in history, and with the weekend looking back at those levels, the downfall felt by the average market participant becomes all the clearer.
Current levels of around 10/100 have previously proved to be excellent buying points based on sentiment alone, with Bitcoin settling there both in March 2020 and the pit in the bear market in 2018.
