Bitcoin (BTC) kicks off the first full week of February with a break from a potential breakdown below $42,000.
The price of BTC remains trapped in a sticky range, with January only seeing a meager 0.6% increase. What could be in store for the market next?
The bulls of Bitcoin are still struggling to gain the necessary momentum to overcome selling pressure and challenge the range highs in the low to mid-$40,000 area.
The road ahead is looking increasingly rough: the halving is just two-and-a-half months away, and there are conflicting opinions on how the price will react before and after. Some predict a major change and a potential new all-time high before mid-April, while others expect “business as usual” with no significant price action until months after the halving.
In the background, macroeconomic risks continue to loom, with the recent turmoil in Chinese equities markets adding to the uncertainty.
Last week, United States data surprised the markets, raising questions about the potential evolution of the Federal Reserve’s economic policy, particularly in regards to the timing of interest rate cuts, which is a crucial factor for both crypto and risk assets.
Cointelegraph delves deeper into these topics and more in our weekly rundown of what to keep an eye on in the world of BTC/USD.
Bitcoin’s Price Volatility Indicators Predict Uncertainty
Bitcoin closed at around $42,550 on Bitstamp for the week, its second-highest close of 2024.
Following this, BTC/USD attempted to sell off, with two retests of $42,200 before bouncing back to around $600 higher at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.
This suggests that there is strong demand in the current price range, which has been a key area for Bitcoin for over 150 days.
In his latest analysis of the spot market, popular trader Skew noted that a limit bidder protected the price action from further downside overnight.
This is reminiscent of mid-January, when the price dropped from its two-year high above $49,000, and Skew also pointed out that $43,100 is a crucial level to overcome.
“So today, I’m looking for a continuation of the 1H/4H trend and if buyers can sustain a move above $43.1K and the diagonal downtrend line,” Skew explained in another post on X (formerly Twitter).
The accompanying chart includes simple and exponential moving averages on the 4-hour chart, as well as the sloping resistance line.
Meanwhile, both the Relative Strength Index (RSI) and Bollinger Bands are showing signs that volatility may return.
On the weekly timeframe, the RSI has “reset” to lower levels while the price has consolidated, as noted by analyst Matthew Hyland over the weekend.
The current weekly RSI stands at 68.9, just below the key level of 70 that often accompanies significant price increases.
The 3-day Bollinger Bands chart also shows a significant “squeeze,” with the bands tighter than they have been since the end of October, according to Hyland.
As Cointelegraph often reports, periods of tighter bands suggest that there will be a price expansion, but it is not immediately clear in which direction it will go.
Is Bitcoin’s all-time high before the halving a possibility?
One of the key arguments for Bitcoin enthusiasts this year, as it is every four years, is the upcoming block subsidy halving.
This event, set to occur on April 18, will reduce the amount of BTC miners receive for each block they mine by 50%, to 3.125 BTC.
Although the halving is still over two months away, its potential impact on market sentiment is already a topic of discussion and closely monitored by experts. However, opinions on what could happen to BTC’s price as a result vary greatly.
In a market update on February 2nd, CEO and co-founder of trading suite DecenTrader, Filbfilb, took on a resigned tone. In his view, this halving year will play out similarly to previous ones, with no significant price increases until several months after the event. He also expects the market to “sell the news” surrounding the halving, much like what happened with the launch of the first U.S. spot Bitcoin ETFs in January.
As reported by Cointelegraph, Filbfilb’s forecast is actually earlier than many mainstream predictions for BTC’s new all-time high, which is expected to occur in Q4 of 2024.
However, his prediction is in stark contrast to the optimistic voices that anticipate a challenge to BTC’s price records at or even before the halving.
“Let’s take a step back and consider how the next 30 to 60 days could play out. Many people are worried about a dip, but I want to present the bullish scenario,” wrote popular investor Fred Krueger in an X post on February 4th.
Krueger’s hypothesis is based on the rapid changes in the netflows of the new ETFs, where selling pressure is consistently decreasing.
“In just 18 trading sessions, they have reached a total of 175K coins, valued at 7.5 billion,” he calculated.
Research and data analyst at crypto insights firm CryptoSlate, James Van Straten, drew comparisons to the recent gains in Meta’s market cap. Krueger responded by saying he “expects volatility” when it comes to Bitcoin’s own surge.
Spot Bitcoin ETFs: A Look at the Latest Investment Trend
The recent influx of ETFs into the Bitcoin market has been nothing short of impressive.
Globally, ETF products now hold over 3% of the total BTC supply, with BlackRock and Fidelity leading the pack among U.S. spot offerings with a combined ownership of 75% of the newly acquired BTC.
It’s worth noting, however, that the Grayscale Bitcoin Trust (GBTC), which has recently converted to an ETF, continues to experience significant outflows as clients withdraw their funds.
Despite this, both Cointelegraph ETF investment advisor Nate Geraci and other market observers have noted that BlackRock and Fidelity’s offerings made it to the top ten ETFs by inflows last month, despite only launching on January 11th.
This marks a significant shift in the market, as previously reported by Cointelegraph, where many were taking a “wait and see” approach towards spot ETFs.
However, with the pressure from Grayscale easing and the expectation that net outflows will eventually cease, financial commentator Tedtalksmacro argues that the only remaining narrative for selling is an unknown event that may occur in the future.
China Pledges to Step In as Stock Trading Halted
Beyond Bitcoin, this week’s macroeconomic data has the potential to surprise, as China takes center stage in market volatility. The CSI 1000 index plummeted 8%, forcing a 30% halt in trading for its stocks and hitting a five-year low.
The chaos follows liquidity injections from Beijing and the collapse of Evergrande, China’s second-largest property developer.
The China Securities Regulatory Commission (CSRC) released a statement on February 4th, quoted by Reuters, promising to “steady expectations and confidence” and prevent “abnormal market fluctuations.”
At the time of writing, the CSI 1000 has lost nearly 27% year-to-date.
“China’s stock markets finally seem to be catching up to their struggling real estate market,” observed trading resource The Kobeissi Letter.
This sets the stage for a highly anticipated opening on Wall Street, as the US faces uncertainty over how to handle quantitative tightening (QT).
As reported by Cointelegraph, expectations for the Fed to lower rates at its March meeting decreased after last week’s better-than-expected nonfarm payrolls data. This week, unemployment figures will add to the mix.
Meanwhile, concerns over the health of regional banking sectors persist. When it comes to the impact on Bitcoin and cryptocurrency, former BitMEX CEO Arthur Hayes predicts an initial capitulation in March, followed by a dramatic recovery in BTC price.
His downside target for BTC is $30,000.
Whales Shift Towards Big Moves in Rebalancing
Despite the stagnant price of BTC, behind the scenes, whales are preparing for changes.
In their latest research, Santiment has observed significant changes in the composition of whale populations over the past week.
The number of wallets holding between 1,000 BTC and 10,000 BTC has reached its highest point since November 2022, while wallets holding 100-1,000 BTC are at their lowest point since then, with 1,958 and 13,735 wallets respectively.
“Bitcoin may be ranging between $41K and $44K, but whale wallets are making big moves this week,” the report summarized.
November 2022 marked a turning point as the collapse of the exchange FTX disrupted the crypto market, leading to Bitcoin reaching lows of $15,600 around a month later.
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