Bitcoin (BTC) enters the last week of February down but showing signs of strength as it holds a key support level.
After a few days of nervousness in both the macro and crypto markets, the BTC/USD pair is below $40,000, but there are already signs that a comeback could be what starts the week in the right direction.
The situation is not easy: Inflation concerns, US monetary policy and geopolitical tensions are at play, and with them the possibility that stocks will continue to suffer.
The new signals from the Federal Reserve will be a hot topic in the short term, as The first interest rate hike is expected to be announced and applied in March.
Could it all be a storm in a cup of tea for Bitcoinwhich on a technical basis is stronger than ever?
Cointelegraph lays out five factors that could influence its price action in the coming dayssince the storm clouds remain over the world economy.
Stocks lead a gloomy macro week
The main story for bitcoin traders this week comes from outside: the post-covid economic outlook and concerns about relations with Russia.
The first comes in the form of how the Fed will respond to rising inflation and, more specifically, whether its hinted interest rate hikes will start in March as expected.
Such rises are bad news for burgeoning equities, which has had two years of runaway profits thanks to the Fed’s gargantuan liquidity program to counter yet another Covid-era demon: lockdowns and unprecedented controls on economic activity.
With the “easy money” that will soon begin to run out, there could be a kind of reality check for everyone.
As for rate hikes, too many too soon risks causing a recession -an issue that is already being discussed as a possible “necessary evil” for other countries-, while a light touch could, on the contrary, not reduce the highest inflation of the last 40 years.
What’s more, the situation with Russia and its alleged plans for Ukraine worries equities even more.
By contrast, commodities like oil have benefited from fears of all-out war, which have so far been unfounded, as diplomacy is weak this week.
In general, however, the short-term view is one of considerable uncertainty, while optimism remains for the recovery of risk assets, such as cryptocurrencies, and traditional stocks by the end of 2022.
However, figures cannot be hidden.
“Global equities have lost another $1.3 trillion in market cap this week on increased Russia/Ukraine risk and the possibility of the Fed raising rates further this year,” summarized on Sunday, market commentator Holger Zschaepitz.
“The latter is expected to stall growth and trigger a recession by 2023H1 in the US. The shares are now worth $114 million, equivalent to 134% of global GDP.”
Trading on Wall Street begins on Tuesday this week due to a public holiday in the United States.
BTC Price Considers CME Futures Gap
With this, It’s been tough for the average bitcoin day trader this month.
The month of February has only allowed about two weeks of easy gains, with macro influences that ended the party the week before.
Since then, The BTC/USD pair has lost support at $40,000 and has threatened a full pullback from the ground it just gained this month.
However, the $38,000 level – a level that had previously been highlighted as essential for the bulls – remained untouched.
The weekly close, although the lowest in several weeks, was accompanied by a new breakout of the Relative Strength Index (RSI) on the 4-hour chart, a classic signal that precedes short-term price bounces.
True to form, bitcoin price rose, hovering around $39,200 at the time of writing this article.
#bitcoin 4 hour RSI brokeout with the close
Waiting for the MACD to confirm: pic.twitter.com/J7rPoYISlU
— Matthew Hyland (@MatthewHyland_) February 21, 2022
Bitcoin’s 4-hour RSI broke through the close. Waiting for the MACD to confirm it:
Experienced traders tend to ignore the BTC/USD pair on the weekends due to the lack of volume that exacerbates any given move. As such, the drop to $38,000 could itself be something of an exaggeration of market sentiment.
What’s more, a bounce has clear targets: $40,000 as support/resistance, but also Friday’s CME futures closing price of $39,860which is above the main part of the decline that occurred on Saturday.
—Livercoin (@Livercoin) February 20, 2022
Observing this. Clearing the lows and returning to the CME closing price. #bitcoin
Bitcoin has a habit of closing these “gaps” on the CME chart, often in a matter of days or even hours. once the new trading week gets underway.
Who is buying while you are selling?
Amid disbelief that some are choosing to sell their BTC now after holding out for several months down, the data shows that the big players are smelling a bargain.
Some of the biggest bitcoin wallets are putting their money where their mouth is, and have been doing so throughout 2022 and even before.
There are many examples; the on-chain monitoring resource BitInfoCharts show the “up only” trend of a particular entity.
Monday alone saw his balance increase by 150 BTCand he’s not the only one: others have been collecting coins during this weekend’s local low.
When you panic sell your #bitcointhis guy buys it all.
— C15Capital ⚡️ (@Capital15C) February 20, 2022
When you panic sell your bitcoin, this guy buys it all. Today this guy bought 6 times already, $20 million worth of BTC.
However, small volume holders are not necessarily weak hands. The latest figures from on-chain analytics firm Glassnode show that the number of wallets with at least 0.01 BTC ($393) has reached an all-time high of 9.4 million.
The last peak was, in fact, at the end of January, before Bitcoin’s last rally to $45,500.
As Cointelegraph reported over the weekend, BTC supply is increasingly illiquid overall, with its share inactive for at least a year approaching all-time highs.
Destroyed Coin Days Hint at Possible Bottom
Those looking for signs that the $38,000 level was the local low need not look too far.
Thanks to on-chain data analysis, it can now be seen that Long-term bitcoin investors repeated the behavior over the weekend that accompanied the July 2021 and September 2021 BTC price lows.
The data setthis time from CryptoQuant, governs “coin days destroyed” (CDD), i.e. the cumulative number of days since each BTC last moved on a given day.
The weekend saw a significant number of “older” coins on the movethus “destroying” the largest number of inactive days since the bottom of July 2021 below $30,000.
In terms of raw numbers, the CDD was the highest since July 2019, although the event at the time was accompanied by a local high, rather than a low.
The phenomenon was noticed by CryptoQuant contributor IT Tech, who also highlighted another on-chain metric that governs hodlers signaling downward price movement.
#bitcoin I found something really interesting. Before price pullback some of Long Term HODLers moved their $BTC Because LTH-SOPR spiked twice today. Each time after this event price goes down. CDD showed also big spike. What is CDD and LTH-SOPR – read tweets below. pic.twitter.com/HaPLgbkUjh
— IT Tech (@IT_Tech_PL) February 20, 2022
I have found something really interesting. Before the price pulled back, some of the long-term HODLers moved their BTC because LTH-SOPR spiked twice today. Every time after this event, the price went down. CDD also showed a large spike. What are CDD and LTH-SOPR? Read the tweets below.
Reacting, the popular Twitter account PlanC He suggested that the two could form a leading indicator for Bitcoin in the future.
The “extreme fear” returns
With all the influencing factors, it could be said that It’s no wonder cryptocurrency market participants don’t quite know how to feel about the prospects.
The Cryptocurrency Fear and Greed Index, the popular sentiment indicator that attempts to quantify market emotions, agrees.
Bouncing below $40,000, the general sentiment has been flirting with a return to the “extreme fear” zoneonly to get back into it even as bitcoin spot price action has moved higher.
From Monday, the index measures 25/100, the highest “high” extreme fear reading possible, but which is more than 50% lower than the “neutral” level seen just four days ago.
The Fear and Greed Index has seen much deeper lows this yearand a definite reversal was over having entered January when it approached record lows of 9/100.