Bitcoin (BTC) starts the new week on a promising basis with BTC price action near one-month highs – can it continue?
With a new year boost for the bulls, BTC/USD is currently surfing levels not seen since mid-December, and the weekly close is encouraging.
The move comes ahead of a notable macroeconomic week for cryptocurrency markets, with the December 2022 Consumer Price Index (CPI) being printed from the US.
Federal Reserve Chairman Jerome Powell will also speak about the economy, with inflation at the center of everyone’s attention.
The FTX contagion continues in the cryptocurrency sphere, with Digital Currency Group (DCG) at odds with institutional clients to resolve solvency issues at subsidiary Genesis Trading.
Meanwhile, under the hood, Bitcoin is still showing signs of recovery from the FTX turmoil, with miners among those taking a break.
Cointelegraph takes a look at these factors and more as the second trading week of January begins.
The price of Bitcoin has crossed $17,000
Bitcoin managed to climb higher on the weekly close on January 9th, reaching levels not seen on the chart since December 16th.
Data from Cointelegraph Markets Pro and TradingView show local highs at $17,250 on Bitstamp.
Although it only added a few hundred dollars, the move in BTC/USD was not overlooked given the extremely tight trading range that existed for many of the previous weeks.
Nevertheless, traders were reluctant to change their longer-term conservative outlook, anticipating a potential continuation.
“Onwards and upwards to my $17,300 – $17,500 target,” Crypto Tony told his Twitter followers. update per day:
“I took some profits from my long scalp and stayed short while we were below 17,500 at the 4-hour close.”
Michael van de Poppe, founder and CEO of trading firm Eight, also left the door open for some modest upside to continue, but warned that the start of the week would be bumpy.
“I’m still following a case like this in Bitcoin,” he said confirmed along with an explanatory table:
“I think we’ll continue to rally next week, but there will likely be a dip due to Gemini or early Monday corrections.”
Meanwhile, Venturefounder, an analyst involved in the CryptoQuant on-chain analytics platform, reminded investors to get closer.
“Bitcoin has been between 16 thousand and 18.5 thousand dollars for 2 months” he admitted:
“Watch this range very carefully, a break from either direction could bring 20% volatility, it could happen soon. A definitive break of $16k could see $13k, $18.5k could gain support, we could see $22.5k.
The CPI countdown comes as risk asset traders take a look at volatility
All eyes, including the Federal Reserve, are on inflation data this week with the December print of the Consumer Price Index (CPI) expected to be released.
The CPI, which will greet markets on January 12, is a key component of Fed policy, and traders and analysts are well aware that its signals could lead to changes in its stance.
Recently, the CPI has been falling, indicating that the Fed’s current rate hikes are having a positive effect on inflation.
If this continues longer than expected, or even declines, hopes will rise that the Fed will reduce interest rate hikes sooner, or even cancel them altogether.
This, in turn, provides a window for risk assets, including cryptocurrencies, to gain as Fed policy easing ignites risk appetite.
“We expect great volatility. A big cash position and a light position size for me,” Ted Zhang, trader and research analyst at Revere Asset Management, he said Twitter followers described the CPI event as a “big week”.
Others noted the unusual timing of the CPI chart, with the data coming two days after Fed Chairman Jerome Powell’s speech on the economy.
“Unfortunately or fortunately the speech is on tuesday and cpi is on thursday so any hawking after cpi numbers on thursday will be cancelled!” an answer to readadded that market reactions to Powell’s speech could be “noise.”
According to CME Group’s FedWatch Tool, the chance of a 25-basis-point rate hike this month is now 75%, and the chance of a big 50-basis-point move is 25%.
Skeptics, including long-term “Big Short” investor Michael Burry, argue that inflation will return, forcing the Fed to raise rates again.
“Let alone negative CPI inflation is unlikely to fall below 2%,” wrote gold bug Peter Schiff. the answer For Burry last week:
“But I agree with you that the Fed will return to QE and official inflation will reach new highs. The unofficial actual rate will hit a new all-time high.”
DCG faces the music in public
Coming in for the grill this month is the institutional investment giant Digital Currency Group (DCG) as the fallout from the FTX saga continues.
Exposure to FTX has increased pressure on some DCG subsidiaries in an increasingly complex story that has raised questions about the future of even the largest institutional Bitcoin investment vehicle.
Grayscale Bitcoin Trust (GBTC) currently has over $10 billion in BTC assets. According to data from Coinglass, its share price is trading at a 44% discount to the Bitcoin spot price.
As Cointelegraph reported, the DCG firm has frozen some of its holdings in Genesis Trading after stock exchange Gemini stopped pullbacks in light of FTX. Its co-founder Cameron Winklevoss publicly turned to DCG CEO Barry Silbert for answers.
On Jan. 8, he wrote an open letter to Silbert setting a deadline for resolving the situation, but Silbert himself disputes this as time goes on.
“DCG made an offer to Genesis and your advisers on December 29 and received no response,” he said. he claimed Part of a Twitter response to Winklevoss on January 2nd.
If events take an unexpected turn, the implications for the Bitcoin markets could be more serious, with DCG’s failure to be recognized as an investment entity particularly glaring.
describing recent events, Glassnode’s lead chain analyst Checkmate said DCG continues to “explode in slow motion”.
“And the Bitcoin price is basically a stablecoin,” he said.
“2023 is all about DCG at this point,” said Justin Herberger, contributor to the Invest and Prosper newsletter. forecast:
“If they somehow fall, it’s going to get ugly. This could be the last leg of our retracement from bitcoin ATH to 85%.”
Miners break serious selling streak
Bitcoin miners have been on the radar for most of 2022, but the fall in the price of BTC after the FTX explosion made an already weak situation worse.
Miners started giving up their Bitcoin holdings to remain financially secure, and on-chain metrics quickly warned of a miner “capitulation” already underway.
As Cointelegraph reported, neither the volume nor the duration of the selloff seemed critical, and recently, the situation has stabilized.
“The heavy selling pressure from bitcoin miners that has been holding back the market for the past 4 months has finally subsided,” said William Clemente, founder of crypto research firm Reflexivity. summarized alongside data from blockchain analytics firm Glassnode this weekend.
This data showed a 30-day net position change for Bitcoin miners, which actually started to increase from the previous month.
Separate Glassnode data is supported miners’ BTC reserves hit a one-month high on January 8.
Looking at Bitcoin’s hash rate — the estimated amount of processing power dedicated to mining — Jan Vuestenfeld, an analyst at cryptocurrency research and advisory firm Quantum Economics, was equally optimistic about the status quo.
“Despite miners being under heavy pressure, it’s crazy how the hashrate has risen given the 30-day moving average, which has corrected a bit over the last two months of 2022” noted.
Over the past week, Bitcoin’s network difficulty has decreased by around 3.6%, given the reduced competition among active miners. According to BTC.com’s latest prediction, the next correction will erase these losses to add 9% to the difficulty level, marking an all-time high.
“Extreme Fear” Responds to 18-Month Low in Cryptocurrency Volume
According to the Crypto Fear and Greed Index, crypto market sentiment is as uncertain as ever when it comes to the near-term outlook.
Related: Macroeconomic data points to intensifying pain for crypto investors in 2023
Over the weekend, the Index, which compiles a sentiment score from a basket of weighted triggers, fell back to the top of its lowest bracket, “extreme fear.”
“Extreme fear,” a first for 2023, is familiar to long-time market participants who watched last year’s longest run of sentiment in the Index’s bottom zone.
At the same time, the interaction with cryptocurrency seems noticeably weak at current price levels.
“Santiment” research firm has data caught The lowest transaction volume for a cryptocurrency since mid-2020.
“Altcoin volume is particularly low,” the accompanying chart notes.
Extract the numbers from CryptoQuant marked popular social media commentator CryptoBitcoinChris, however, pointed out that whale sales have declined since December, which is potentially a trend and a “positive impact on market sentiment.”
The views, opinions and opinions expressed herein are solely those of the authors and do not reflect or represent the views and opinions of Cointelegraph.