‘Most bullish macro backdrop in 75 years’ — 5 things to watch in Bitcoin this week
With the recent bull run, Bitcoin mining is back in overdrive with many looking to capitalize on this opportunity. With the market reaching new highs and volatility easing, here are five things to watch out for this week.
“coins to watch this week” is a weekly column that covers the top cryptocurrencies and their latest news. This week, Bitcoin has been on the rise and many people are wondering what’s going on.
Bitcoin (BTC) is off to a peculiar start this week, strikingly similar to where it was at this time last year.
BTC/USD is about $42,000, virtually precisely where it was in week two of January 2021, after what different sources have termed as a full year of “consolidation.”
Although there have been huge ups and downs in between, Bitcoin has generally remained within a now-familiar range.
The future differs depending on one’s point of view; some feel fresh all-time highs are more than likely this year, while others predict many more months of consolidation.
Cointelegraph examines what might shift the status quo on shorter timelines in the next days, with crypto sentiment at some of its lowest levels in history.
Will $40,700 be enough to keep you afloat?
Bitcoin had a difficult weekend, as the latest in a series of sharp negative swings brought it closer to the $40,000 support level.
BTC/USD approached $40,700 on key exchanges before rebounding, according to data from Cointelegraph Markets Pro and TradingView, and the correction has since held.
Ironically, the same level was under scrutiny on the same day in 2021, but during what turned out to be the most vertical portion of Bitcoin’s current bull run.
Last September, the attention shifted back to $40,700, which served as a turning point after many weeks of correction, allowing BTC/USD to rise to all-time highs of $69,000.
Analysts now believe the possibilities of a collapse to the $30,000 level are unquestionably greater.
Rekt Capital stated, “Weekly Close is just around the corner,” accompanied a graphic showing target levels.
“Theoretically, there is a chance that $BTC could perform a Weekly Close above ~$43200 (black) to enjoy a green week next week. Weekly Close under ~$43200 however & BTC could revisit the red area below.”BTC/USD annotated candle chart. Source: Rekt Capital/ Twitter
Bitcoin eventually finished around $42,000, and has since hovered around that level in what might be a brief respite for bulls.
“I anticipate the market makes a lower high,” said another trader and analyst Pentoshi, adding that he thinks the price of $40,700 would eventually decrease.
Meanwhile, the $30,000 floor from last summer is becoming a more appealing objective.
Over the bleak forecast for cash, a consensus is forming.
The macro picture for risk assets this week is exceptionally difficult, and Bitcoin and altcoins are no exception.
What the future holds, on the other hand, differs greatly from one expert to the next.
The Federal Reserve of the United States is widely expected to begin rising interest rates in the coming months, leading investors to de-risk and giving crypto bulls a headache. “Easy money,” which started pouring in March 2020, will be considerably more difficult to obtain by today.
Arthur Hayes, the ex-CEO of BitMEX, summed up the pessimistic stance well in his most recent blog post last week.
“Forget what non-crypto investors say; my take on crypto investors’ mindset is that they foolishly assume the whole complex’s network and user growth fundamentals would enable crypto assets to continue their upward trajectory uninterrupted,” he said.
“This, in my opinion, sets the stage for a major washout, as the corrosive impact of increasing interest rates on future cash flows will likely cause speculators and investors on the margin to dump or drastically cut their crypto holdings.”
The consumer price index (CPI) statistics for December will be revealed this week, which will likely add to the theme of unexpected inflation spikes.
Hayes is far from alone in his concern about what the Fed may do to crypto this year, with Pentoshi and others asking for a temporary halt to the rally.
“And, finally, can crypto ignore the Fed if it chooses to go all-out with a deflationary machete?” In a series of tweets on the subject this weekend, expert Alex Krueger concluded, “I doubt it.”
“‘Don’t fight the Fed’ applies both up and down the food chain. Houston, we have a problem if the Fed is *too hawkish*.”
There were still a few optimists in the room. 10T Holdings’ Founder and CEO, Dan Tapiero, advised followers to “ignore” the current sell-off and concentrate on a long-term investment opportunity that hasn’t altered.
He described the macro background as “the most positive in 75 years.”
“The economy is booming, thanks to large negative real rates.” The Fed will never bring interest rates in line with inflation. Stocks, Bitcoin, and Ethereum are all good investments. Hodl in the face of short-term volatility. Cash savings in real dollars will continue to depreciate.”
Here’s what the Effective Fed Funds Rate and Inflation Rates were like when the unemployment rate was 3.9 percent, which is where it is now.
Identify the anomaly… pic.twitter.com/zU1zRj1uXC
January 7, 2022 — Charlie Bilello (@charliebilello)
Charlie Bilello, the founder and CEO of Compound Capital Advisors, collated statistics that Tapiero highlighted.
The RSI has dropped to two-year lows.
Despite the doom and gloom, not everything points to a long-term negative period for Bitcoin.
As Cointelegraph has reported, on-chain signs are overwhelmingly pointing to the upside, and historical context backs up those claims.
The relative strength index (RSI) of Bitcoin has continued to fall this week, hitting its lowest levels in two years.
Only twice in the previous two years has the #Bitcoin RSI been this low. It seems that a bottom is approaching and that a rebound is on the way. Let’s have a look at the image. twitter.com/qhQ1pD8yEl
January 9, 2022 — Bitcoin Archive (@BTC Archive)
The Relative Strength Index (RSI) is a popular statistic for determining whether an asset is “overbought” or “oversold” at a certain price point.
Exploring the depths at $42,000 implies that the market considers this level to be too excessive, and that a comeback is needed to bring it back into equilibrium.
Last January, on the other hand, the RSI was sky high and far into “overbought” area, but BTC/USD was trading at the same price.
“The Bitcoin RSI is on the lowest point in 2 years on the daily. March 2020 & May 2021 were the last ones. And people flip bearish here / want to short,” a hopeful Cointelegraph contributor Michaël van de Poppe commented.
BTC/USD 1-day candle chart with RSI (Bitstamp). TradingView is the source of this information.
Last week, Cointelegraph saw similar positive signs on the monthly RSI chart.
The hash rate has recovered. Kazakhstan has suffered setbacks.
From the area of Bitcoin fundamentals, another hiccup from last week is already “healing itself.”
After achieving new all-time highs in recent weeks, Bitcoin’s network hash rate suffered a setback when internet connectivity in Kazakhstan was disrupted due to turbulence.
Kazakhstan, which accounts for around 18% of the hash rate, has recently steadied, enabling the hash rate to revert to its previous levels of 192 exahashes per second (EH/s).
Responses to what may have reminded some of last May’s China mining restriction, which dropped hash rate to 171 EH/s, seem to have boosted hash rate and sustained record-breaking miner participation.
Despite the turmoil, Bitcoin’s network difficulty managed to raise somewhat this weekend, and is on course to do so again at its next scheduled readjustment in little under two weeks.
Screenshot of a live Bitcoin hash rate chart. MiningPoolStats is the source for this information.
On-chain analyst Dylan LeClair said of the old adage that “price follows hash rate,” “it’s going up forever.”
For comparison, China’s mining ban resulted in a 50% drop in hash rate. The losses were recouped in around six months.
“What if…?” says the narrator.
Quant analyst PlanB, author of the stock-to-flow-based BTC price models, has been predicting a Bitcoin trend reversal for quite some time.
BTC, LINK, ICP, LEO, and ONE are the top 5 cryptocurrencies to monitor this week.
Despite being put to the test of his ideas — and the ensuing storm of social media criticism — PlanB is more confident than most about mid- to long-term price action.
This weekend, he said, “I realize some people have lost trust in this bitcoin bull market.”
“However we are only halfway into the cycle (2020-2024). And although BTC experiences some turbulence at $1T, the yellow gold cluster at S2F60/$10T (small black dots are 2009-2021 gold data) is still the target IMO.”Stock-to-flow cross-asset (S2FX) chart. Source: PlanB/ Twitter
He was referring to the stock-to-flow value for Bitcoin, gold, and other assets in his stock-to-flow cross-asset (S2FX) model, which predicts a BTC/USD price of $288,000 during the current halving cycle.
Closer to home, though, a more simple comparison of Bitcoin’s current cycle with its two prior cycles revealed a possible path that starts with a U-turn today.
So, what if… pic.twitter.com/te36HkFAbQ
— January 9, 2022 (@100trillionUSD)
After failing to meet its aim for the first time ever in November, a different model, the floor model, which requested $135,000 per bitcoin by the end of December, has now been abandoned.
The “bitcoin roadmap 2022” is a prediction that the Bitcoin price will reach $20,000 by 2022. There are 5 things to watch in Bitcoin this week.