Bitcoin (BTC) begins its first full week in 2022 in known territory under $ 50,000.
After ending December at $ 47,200 – well below the majority of bullish expectations – the largest cryptocurrency has much to live up to as signs of a halving of cycle stops are nowhere to be found.
With Wall Street set to return after equities ended the year on high, inflation and interest rate hikes pending, 2022 may soon prove to be an interesting market environment, analysts say.
So far, however, everything is calm – BTC / USD has not produced any major surprises for several weeks.
Cointelegraph takes a look at what could change ̵[ads1]1; or continue – the status quo in the coming days.
Stocks could see 6 months with “just up”
Look no further than the S&P 500 for an example of the state of US equities.
The index achieved no less than 70 records in 2021, and rounded off the year with a boom, although risk assets looked far less appetizing.
Bitcoin was among them, below the $ 50,000 mark with the only noticeable events coming in the form of peaks and troughs around thin holiday liquidity.
With that said, central bank policy is widely tipped to give a potential cat among the pigeons in the coming months. The Federal Reserve has signaled two interest rate increases this year, and the market’s ability to absorb them is seen as a key test of asset development.
For the first part of the year, however, it may well be a continuation of the last taste of “business as usual” – stocks that increase the heights of the times.
“History suggests that the beginning of interest rate hikes will actually result in stock market power for 6 months,” noted Charles Edwards, founder of asset manager Capriole, in a series of tweets this week.
«10 of the 13 regimes (77%) since the 1950s had a positive stock market return in the first six months, averaging + 5.1%. We are approaching the start of a new regime now. “
Edwards said that while such circumstances are generally “good” for Bitcoin, upheavals further down the line are likely to mean that stocks will be beaten in the long run thanks to interest rate hikes.
“Without significantly higher economic growth (which has not yet been seen), it is unlikely that any interest rate hike programs from the Fed will have a long run,” he continued.
“Bitcoin will be volatile during this period, both an effect of volatility in the stock market, but also from sharp price corrections from the Fed.”
Inflation will be on the radar again next week, with January 12 scheduled for the latest US Consumer Price Index (CPI) data for December.
$ 40,000 remains support floor
Bitcoin spot price action has yielded precious little in the form of interesting signals lately, and stayed in a well-defined area.
A battle between oxen and bears has actually been somewhat subversive in nature beyond the rhetoric found on social media – volumes are small, interest from retailers is low, and large players continue to maintain sales levels nearby.
I think two levels are important #Bitcoin.
▫️ $ 48,000, the one we’re rejecting at the moment.
▫️ $ 49,400, the one that caused the last correction and should turn for a bullish test of potentially between $ 55k. pic.twitter.com/zISQu2IcDV
– Michaël van de Poppe (@CryptoMichNL) January 2, 2022
Responds to levels seen from Cointelegraph contributor Michael van de Poppe Sunday, popular trader and analyst TechDev agreed that $ 48,000 represents “a small brick wall.”
On the downside, Van de Poppe said he looked at the area between $ 40,000 and $ 42,000, with action over it equivalent to “accumulation”.
However, Bitcoin has a habit of reversing even the strongest trend at the least expected moment.
For retailer Pentoshi, there is little reason to celebrate at levels well below $ 60,000, these last appeared over a month ago.
“I want to extend logical areas in a downward trend. I would be macro bearish to 58-60k reclaim. And bullish in local areas, »he summarized about his position this weekend.
Pentoshi and others called for a pivot to Ether (ETH) based on the altcoin strength, thus giving a practical way to “de-risk” with Bitcoin underperformance.
That strength is captured in Bitcoin’s market value dominance, which has now fallen below 40% for the first time since May, data from TradingView shows.
On-chain calculations predict “sustainable price trend”
For those looking for a silver lining to the uninspiring price action, chain measurements provide no shortage of relief.
The further away from the market comes from last month’s snap correction, the more tempting Bitcoin looks as an investment point based on historical trends.
In his latest newsletter issued on December 31, Capriole CEO Ryan McCoy highlighted the changing tides in investors’ sales habits that correspond to the final stages of previous corrections.
Of particular interest is the Short Term Holder used profit output ratio (SOPR) from the chain analysis company Glassnode, which shows the extent of gains or losses from recently used coins – especially those that have recently moved in the last 155 days.
At the moment with a median score below 1, SOPR shows that coins used at a loss are declining in number – a potential form of exhaustion of sellers.
“Usually, when this calculation starts to bottom out and then rises, a more sustainable price trend has begun,” McCoy explained.
“The 30-day median is still below 1 (indicating that the average price of the coins being moved is lower than the price they were purchased for), but signs of life like this after a significant corrective event suggest that we are probably in the final stages of current correction.”
The Cointelegraph has reported a lot on hodlers’ habits when it comes to BTC, and long-term investors remain steadfast in their belief not to sell.
“Despite a -38% decline since November, long-term owners continue to diamond manage Bitcoin,” McCoy summed up.
“Last time Bitcoin was at $ 47K, long-term holdings were 10% lower. So far, there has been negligible distribution despite the volatility. It is bullish.”
Fundamentals have (almost) never been better
To continue the positivity, basic networking emphasizes the strong faith of another group of key Bitcoin market participants.
Miners, despite seeing all-time highs of $ 69,000, collect, not sell, their coins.
At the same time, the hash rate for the network is at an all-time high, these were last seen in March and April before the overthrow of the Chinese ban triggered months of migration.
Should the old adage “price follows hash speed” remain true, miners’ belief in the long-term profitability of Bitcoin provides a key indicator of where the market is going.
“Calculations like this are in fact old – fashioned basic perspective material and are largely overlooked by newer and sexier methods of explaining price dynamics, supply and demand, but can not be ignored for their ability to explain institutional and infrastructural support to secure the protocol as on this time points effectively underpin the entire cryptoeconomy, “added Capriole.
Hash rate is currently over 190 exahashes per second (EH / s), according to estimates from MiningPoolStats.
Later this week, meanwhile, the Bitcoin network difficulty will increase by around 2.4%.
This reflects the competitiveness of the current mining landscape, and the degree of difficulty should soon cope with 25 trillion again for the first time since the peak before China, data from Blockchain shows.
With each increase, difficulties reinforce network security, creating an even more robust ecosystem.
How sustainable is “extreme fear” this time around?
Bitcoin sentiment began 2022 with severe cold feet, Crypto Fear & Greed Index measures “extreme fear.”
Related: Top 5 cryptocurrencies to see this week: BTC, LUNA, FTM, ATOM, ONE
As Cointelegraph reported, investor sentiment has become very sensitive to even smaller price movements in the current area.
Fear and greed reflect this, and have risen 8 points since the weekend despite the fact that price measures have given little change.
At the time of writing, the index measured 29/100, still in the “fear” zone.
As noted by analysis resource on the chain Ecoinometry, meanwhile, such feelings have historically not played out for long.
“Bitcoin is back in extreme fear. Historically, that means there is a limited downside of 30 days,” it tweeted along with a chart that compiled the index and BTC / USD.