Bitcoin (BTC) starts the first week of 2023 in an encouraging place as volatility recedes with traders.
After failing to move through the Christmas and New Year break, BTC price action remains locked in a narrow range.
Having sealed year-to-date losses of around 65% in 2022, Bitcoin has arguably seen a classic bear market year, but few are actively predicting a recovery yet.
The situation is complicated for the average hodler who follows the macro triggers of the United States Federal Reserve System and the impact of economic policy on the strength of the dollar.
Before returning to Wall Street on January 3rd, Cointelegraph takes a look at the factors at play when it comes to BTC price performance over the coming week and beyond.
Bitcoin traders fear new lows amid falling price
Bitcoin hodlers may crave volatility, but BTC price action so far has been clearly comatose from data from Cointelegraph Markets Pro and TradingView.
It seems that nothing – low-volume Christmas trading, quarterly and annual candle closes, and even before that macro data is printed – can change the status quo.
As reported by Cointelegraph, Bitcoin’s volatility even managed to reach new record lows by the end of the year, according to the Bitcoin Historical Volatility Index (BVOL).
Looking ahead, traders are cautious about what lies ahead for BTC/USD, as signs of fundamental change are completely absent in market behavior.
“All it takes is a small pump to the resistance to turn everyone bullish again. This same bull trap is happening all through 2022, but people don’t learn”, Il Capo from Crypto argued on the day
“12k is very likely.”
His comments came alongside a modest rally for Bitcoin, which broke above $16,700 for the first time in days.
They were also voiced by the famous trader and analyst Pentoshi marked $12,000 as a key support zone for Bitcoin to revisit in terms of volume in higher timeframes.
Meanwhile, once again analyst Tony Ghinea doubled BTC/USD at the $11,000-$14,000 floor.
“We expect all these levels to be achieved within 2-3 months,” a Twitter comment confirmed on January 1.
Michael Burry warns that inflation will return
With another week to go before the United States Consumer Price Index (CPI) prints for December hits, the early days of January are relatively quiet when it comes to BTC macro price catalysts.
That doesn’t mean there’s nothing to watch out for, though, as Purchasing Managers’ Index (PMI) and non-farm payrolls data are all expected next week.
According to CME Group’s FedWatch Tool, the short- to medium-term trend remains one of declining inflation, which in turn gives risk assets room to maneuver.
The Federal Reserve has yet to signal that it will hold on to rate hikes, although the pace of these increases has already begun to decline. As these signals come in, risk sentiment should be markedly stronger.
The Fed will release the minutes of the Federal Open Market Committee (FOMC) meeting on January 4 and provide clear guidance on future policy.
For “Big Short” investor Michael Burry, even this more permissive scenario is not the end of the inflation story.
“Inflation has reached its peak. But this is not the last peak of this era.” warned In a tweet on January 2.
“We’re likely to see CPI in the 2H2023 low, possibly negative, and the US in recession by any definition. The Fed will taper and the government will stimulate. And we will have another jump in inflation. It’s not difficult.”
The implications of Fed policy were clear for 2022 stock market performance, with the S&P 500, for example, finishing the year 1,000 points below many of the most popular estimates.
As markets await the first Wall Street trading day of 2023, the US dollar index is already struggling with what could be the first silver lining of the year for cryptocurrency assets.
The US dollar index (DXY) is currently in danger of breaking through support for more than six months, before re-entering the 100-point level.
“Markets: DXY poised to crash again, 10-year yield hits resistance, WTI crude returns to resistance, gold stalls at resistance, stocks flooded,” Callum Thomas, founder and head of research at macro research house Top Down Charts, summarized Twitter comments for part of the day.
Difficulty due to falling between dangerous hash rate data
In the knee-jerk world of Bitcoin fundamentals, it’s business as usual as the year begins.
Bitcoin’s upcoming difficulty adjustment, which will take place on January 3, will erase the gains made two weeks ago, in a sign that miners are under pressure on BTC price performance.
After rising 3.27% on December 19th, the difficulty will fall an estimated 3.5% this week, according to data from BTC.com, thus failing to seal all-time highs.
The difficulty data in itself provides an interesting insight into the health of Bitcoin “under the hood” – despite concerns about the financial stability of miners, competition for block subsidies remains remarkably high.
Almost as late as December, the data painted a dire picture, with hash rate for the average network participant — an estimate of the aggregate processing power for mining — reaching year-to-date lows.
“This is the most brutal Bitcoin miner delivery since 2016 and possibly ever,” said Charles Edwards, founder of Capriole Investments. commented on time.
“Hash Ribbons delivery captures lowest Bitcoin hash rate reading of 2022 as miners go bankrupt and default under massive pressure from squeezed margins globally.”
The accompanying chart showed that Bitcoin’s hash tapes indicator has entered another “capitulation” zone where miners are closing their hash rate en masse. A similar incident occurred in July 2022, and another one a year before that.
As Cointelegraph reported, Bitcoin’s public mining companies also continue to feel the strain, with Core Scientific receiving a temporary bankruptcy loan of nearly $40 million from creditors including BlackRock.
BTC supply goes to sleep
When volatility is absent in bitcoin for weeks, there is little impetus to sell among hodlers.
The latest chain data supports this theory, with BTC supply becoming increasingly stagnant as speculators walk away.
According to the ten-chain analyst firm Glass knotOver the past five to seven years, the amount of stationary supply in the wallet has reached its highest level since January 2018.
This trend has continued for most of the past year, as those who purchased BTC during the recent halving period have seen their purchase prices bounce back.
As the supply ages, the volume of coins moving on a short-term basis likewise decreases, indicating the absence of speculative trading.
BTC supply volume, which was active three and six months ago, is now at a five-year low, according to Glassnode confirm. Supply that was active three to five years ago is now at a one-year low.
Stockmoney Lizards analyst resource “Supply becomes rare again” he answered to similar dormancy data at the end of last month.
The accompanying chart showed the relationship between static supply and macro highs and lows for BTC price action.
Feelings in no man’s land
In a similar sign that many market participants don’t know how to feel about the future of cryptocurrency, sentiment is neither here nor there.
Related: ‘Crypto Winter’ Won’t End in 2023 — Bitcoin Advocate David Marcus
This is a reading from the Crypto Fear and Greed Index, a popular sentiment gauge that continues to hover over “extreme fear.”
A narrative that has characterized much of the post-FTX collapse seems to be confusion over just how bad the state of cryptocurrency really is.
Of the index’s five sentiment brackets, only “fear” has held up in recent weeks, with the latest trip to “extreme fear” coming in late November.
As Cointelegraph explains in a special guide, Fear and Greed can offer key insights into market activity based on investor behavior. In 2022, it reached 6/100, a score rarely seen in Bitcoin’s lifetime.
“Despite 2022 being brutal for crypto in terms of sentiment, I’ve never been more excited about the industry’s long-term outlook,” said Daniel Cheung, co-founder of investment firm Syncacy Capital. concluded On January 1 on Twitter.
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.