Bitcoin (BTC) starts the new week at a 2023 high, but still divides opinion after the price rally.
What January is shaping up to be is an antidote to last year’s slow bleeding to lower prices, providing the volatility Bitcoin bulls have been waiting for – but can they sustain it?
This is the main question for market participants heading into the third week of the month.
Opinion is divided on Bitcoin’s core strength; some believe the march to two-month highs is a “sucker rally,” while others hope the good times will continue.
Aside from market dynamics, there is no shortage of potential catalysts waiting to assert themselves in sentiment.
Economic data from the United States will continue to come in, while corporate earnings could bring fresh volatility to the stock markets this week.
Cointelegraph takes a look at five potential BTC price bearers as all eyes turn to new support levels and the fate of Bitcoin’s bear market.
Analysts agree on BTC price consolidation
Bitcoin has faced increasing skepticism over the past week after breaking through some key resistance levels.
As Cointelegraph reports, the consensus remains firmly on the downside in the long term, with few believing the current momentum will end as more than a bear market rally.
With warnings of new macro lows of $12,000 still in place, analysts are watching for bearish signs. However, this has not happened so far.
According to data from Cointelegraph Markets Pro and TradingView, the weekly close closed with the one just before the FTX collapse, with BTC/USD still above $20,000 at the time of writing and hitting a new local high of $21,411 overnight.
Volatility has remained in motion, with moves of several hundred dollars on hourly time frames common. There was a drop below $21,000 described as “liquidity hunting” by commentator Tedtalksmacro.
Analyzing levels to hold in the case of a broader pullback, chain analyst Material Indicators identified the 21-week moving average (MA) at $18,600.
“Another $11 million bid wall set up to defend Bitcoin 2017 Top” noted Along with an additional chart of the Binance order book.
“Holding above this level is symbolic and makes the rally more likely to extend, but the IMO’s passing of the 21-Week MA is crucial for a sustained rally. TradFi is closed Monday for MLK Day. Volatility continues.”
Previous post he added that the whale activity was actually helping to revive the market in the stock markets.
Meanwhile, the Stockmoney Lizards trading account focuses on reversing FTX losses he called for “some (lateral) consolidation” at current levels.
Michael van de Poppe, founder and CEO of trading firm Eight, he said Bitcoin may actually consolidate due to a change in the strength of the US dollar.
The US Dollar Index still traded near its lowest levels since early June 2022, hitting 107.77.
Focus on profits as a catalyst for stocks
This week will be off to a fast start in terms of macro data, with producer price inflation data due on January 18.
This will come amid various speeches from Federal Reserve officials, with stocks likely to be rocked by another phenomenon in the form of corporate earnings reports during the week.
As Bank of America strategists noted in a note last week, the S&P 500 has been particularly sensitive to earnings reports, trailing classic data releases such as the consumer price index.
“We see this as a narrative shift in the market from the Fed and inflation to earnings: while reactions to earnings are rising, reactions to inflation data and FOMC meetings are falling,” they said, including CNBC.
Strategists pointed to the Federal Open Market Committee (FOMC) meeting on February 1 to decide on a rate hike.
According to CME Group’s FedWatch Tool, interest rate hikes are expected to be lower than any increase since early 2022, and sentiment favors a 0.25% hike.
“The lower the Fed Funds rate, the more liquidity there is in the system,” said Ram Ahluwalia, CEO of Lumida Wealth Management, a digital asset investment advisor. he wrote last week.
An accompanying chart showed what Ahluwalia suggested was a beneficial relationship between low Fed funds rates and Bitcoin liquidity.
He continued by citing a Jan. 13 appearance in the mainstream media by veteran economist Larry Summers in which he sounded positive about declining inflation.
“Larry issued a statement saying that the Fed’s fight against inflation is ‘much, much closer’ to being done. This is a ‘positive surprise’ for risk assets and supports the Fed’s base camp,” he said.
“BTC benefits from QE Hypothesis: One of the big macro desks listened long bitcoin and left.”
The GBTC winning streak continues
On the subject of institutional interest recovery, another chart that captures all of FTX’s losses is Grayscale Bitcoin Trust (GBTC), the largest Bitcoin institutional investment vehicle.
Data from Coinglass shows that GBTC shares are trading at a 36.26% discount to net asset value as of January 13, the latest date for which data is available.
This discount, previously positive and known as the “GBTC premium”, is higher than at the end of December 2022 and is now higher than at any point since the collapse of FTX.
Its biggest reading came just before that, at 48.62%, when GBTC parent company Digital Currency Group suffered as part of its FTX woes.
This debate often rages on in the open, but GBTC has produced its most encouraging results in months.
Behind the scenes, Grayscale continues to battle US regulators over their refusal to convert GBTC into an exchange-traded fund (ETF) based on the Bitcoin spot price.
On Twitter at large update On Jan. 13, Grayscale’s chief legal officer, Craig Salm, cited the firm’s “commitment” to winning the lawsuit and bringing the first Bitcoin ETF to the US market.
“Once again, converting GBTC to a spot Bitcoin ETF is the best long-term way to track its BTC value,” he said.
“Our case is moving forward, we have strong, common sense and persuasive legal arguments, and we are optimistic that the Court will rule in our favor.”
The difficulty reaches an all-time high
If Bitcoin’s price recovery wasn’t enough to excite the bulls, its network fundamentals tell an equally encouraging story.
In step with the nearly weekly shutdown, the network’s mining difficulty has increased by more than 10%, marking its biggest rise since October 2022.
The move has clear implications for Bitcoin miners and shows that the ecosystem is already benefiting from higher prices.
As reported by Cointelegraph, miners have already slowed the pace of BTC reserve sales in recent weeks. At the same time, the increase in hardship reflects competition for block subsidies returning to the sector.
However, miner balances have decreased over the past week in response to Bitcoin’s rapid price increase. They stood at 1,823,097 BTC as of January 16, marking one-month lows, according to data from on-chain analytics firm Glassnode.
Nevertheless, the miner difficulty has now wiped out FTX reactions and reached a new high in the process.
Glassnode added, “It is in the process of re-examining the estimated average production price for Bitcoin Miners.” noted most of the gains next week last week.
He added that “a break above this level offers much-needed relief to miners’ earnings.”
The accompanying graph showed a “difficulty regression model” that it described as “estimated comprehensive production cost for Bitcoin.”
Feelings come out of “fear” because the whales get a big haul
It’s no secret that the average Bitcoin hodler is experiencing some much-needed relief this month, but is it a case of unchecked euphoria?
Related: 5 Altcoins That Could Exit If Bitcoin Price Stays Up
According to time-honored benchmarks, the Crypto Fear and Greed Index may be “too much, too soon” for a change in sentiment regarding Bitcoin price strength.
On January 15, the Index reached its highest level since April 2022. While still not “greedy,” the move represents a significant change from a few weeks ago.
The cryptocurrency market spent most of 2022 in the lowest “extreme fear” bracket.
It now scores above 50/100, dropping slightly into the new week to remain in “neutral” territory.
For Santiment, a research firm that specializes in gauging the atmosphere around cryptocurrency markets, there is one factor driving Bitcoin’s newfound strength.
The answer is, he is he wrote In a Twitter post over the weekend, the whale is soundly asleep in action.
In the ten days to January 15, large and small whales added to their positions, triggering a chain reaction of supply and demand. In total, they received 209,700 BTC during this period.
Santiment called the data “a definitive explanation for why crypto prices have fallen.”
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.