A “rollback” to $20,000? 5 things to know about Bitcoin this week

A “rollback” to ,000?  5 things to know about Bitcoin this week

Bitcoin (BTC) begins the last week of February in a volatile mood as a crucial area of ​​resistance fails to break.

After a classic “fakeout” during low-volume weekend trading, BTC/USD is back below $25,000 as the bulls still lack momentum.

The biggest cryptocurrency saw what looked like the next leg of its 2023 recovery last week, making quick gains and even hitting new six-month highs.

However, the good times were not to continue and February’s progress was much slower and hard-earned than January’s 40% gains. How will the rest of the month unfold?

A critical monthly close is expected, along with a potential external price trigger in the form of US Federal Reserve minutes.

Meanwhile, Bitcoin network fundamentals are expected to reach a new all-time high, with miners in full recovery mode.

Cointelegraph examines these factors and more in an overview of the BTC price outlook for the last week of February.

RSI “Bearish Divergence” Raises Alarm

After a rather calm start to the weekend after days of reactions to macro data, Bitcoin woke up on Sunday evening to rally above $25,000.

However, that was not to last and, as Cointelegraph reported, there were signs on stock market order books indicating manipulative moves by high-volume traders.

A subsequent drop after the weekly close took BTC/USD back below $24,000 before bouncing back to the same levels as Saturday, where the pair was still trading at the time of writing, according to data from Cointelegraph Markets Pro and TradingView. .

BTC/USD 1 hour candle chart (Bitstamp). Source: Trading View

For traders, there was a natural reason to be wary.

“Not paying much attention to the weekend AP. BTC usually records its significant moves during US trading hours,” Crypto Chase writing as part of a Twitter digest.

Monitoring resource Material Indicators initially flagged order book activity, asking how long the phenomenon might continue with bulls powerless to make higher breakthroughs.

An additional amount of chart from the Binance order book confirmed that the major supply support, known as the “supply wall”, had fallen to $23,460, leaving the spot price room to lower.

BTC/USD order book data (Binance). Source: Materials Indicators/Twitter

Fellow trader and analyst Matthew Hyland admitted that it was “really hard to tell” if Bitcoin could break higher in short periods.

Holding the zone around $22,800 on a pullback followed by the key breakout, however, “wouldn’t surprise me,” he said. said day.

BTC/USD annotated chart. Source: Matthew Hyland/Twitter

Venturefounder, a contributor to on-chain analytics platform CryptoQuant, was more concerned about the strength of the rally.

In a Twitter thread, he warned that external factors such as “macro weakness” could have an immediate bearish impact on crypto markets.

“Bitcoin’s bearish RSI divergence continues…Almost exactly opposite to the May-July 2021 time frame. I think any macro weakness can push BTC back to $19-20,000 very quickly,” is part of the comments. declared.

Venturefounder referred to the Relative Strength Index (RSI) metric, which measures the degree to which an asset is overbought or oversold at a given price. In 2021, the RSI was rising against a correction in BTC prices, subsequently ending at current all-time highs of $69,000 in November of the same year.

All eyes on the FOMC minutes and the US dollar

What form this “weakness” in macro markets might take remains to be seen.

The week ahead contains considerably fewer potential macro triggers than the previous one, with a sprinkling of US data releases including personal spending in the form of the Personal Consumption Expenditure (PCE) index.

However, the event on most crypto pundits’ radar is the release of the February Federal Open Market Committee (FOMC) meeting minutes at the Fed.

This is where the last reference an interest rate hike has been decided, with expectations that Fed Chairman Jerome Powell has included talks of a moratorium on rate hike policy, if only nominally.

“We also released FOMC minutes on Wednesday in which Powell will describe what a ‘pause’ of rate hikes might look like,” Crypto Chase said of the event.

“Amid the coming week, I’m starting to look at swing entries.”

However, not everyone is convinced that the FOMC minutes will be straightforward. Among them is financial markets research resource Capital Hungry, which warned this week that “sneaky hawkish revisions” could be revealed.

“Feds are sneaking hawkish revisions out of the spotlight (not an active FOMC) with a market already adjusted to CPI revisions and the January report. PCE data is fueling elevated inflation sentiment,” he argued in part of the Twitter comment.

One-hour candle chart of the US Dollar Index (DXY). Source: Trading View

Any return to inflationary trends would add strength to the US dollar, which spent the last day of macro trading last week erasing earlier gains.

Matthew Dixon, founder and CEO of crypto ratings platform Evai, explained the bearish scenario for the US Dollar Index (DXY) in what would be a bullish tailwind for risk assets, including crypto. .

Analyst: the moving average “cloud” is here to be broken

As Cointelegraph continues to report, Bitcoin bulls have a problem, which becomes increasingly evident over short periods of time – the 200-week moving average (WMA).

A classic “bear market” trendline, the 200WMA has acted as resistance since the middle of 2022, with BTC/USD spending more time below the level than ever before.

Recovering the level would mark a remarkable achievement, but all attempts have been rejected so far.

“If Bitcoin manages to break above the 200-week MA cloud, which is becoming more and more likely, we will again see a lot more TradFi coverage of the crypto,” Caleb Franzen, Principal Market Analyst at Cubic Analytics, summary at week-end.

Franzen also showed the levels in play in the short term, with a high of $25,200 requiring a breakout.

The “cloud” he referred to involves more than the 200WMA – Bitcoin’s 50WMA is currently at $24,462, which coincides with the current spot price direction.

Additionally, demands on the exchange order books are stacked around the 200WMA, increasing the challenges to push it from resistance to support.

In research published on February 18, Franzen described the WMA cloud as one of “two major signals to add more bullish fuel to the fire” alongside realized price.

“BTC was first rejected at this dynamic range in August 2022 and was briefly rejected at this level earlier in the week. Will he be able to break the top on this second attempt? he asked.

BTC/USD 1 week candle chart (Bitstamp) with 50, 200MA. Source: Trading View

Hash rate, online difficulty for new highs

In a familiar silver lining, Bitcoin network fundamentals keep the bullish mood firmly intact as the month ends.

The next automated readjustment will struggle to add about 10% to its current count. This will undo the slight drop from the previous readjustment to send the difficulty to new all-time highs.

Overview of the fundamentals of the Bitcoin network (screenshot). Source: BTC.com

This is a crucial yardstick for gauging Bitcoin miner sentiment, as such large increases suggest corresponding advances in the competition for block subsidies.

He comes on the back of increased coverage of so-called “ordinal” fees, with miner profitability clearly recovering after months of pressure.

Bitcoin miner net position change chart. Source: Glassnode

Data from on-chain analytics firm Glassnode confirms this. Miners began to hold more BTC than they sold on rolling monthly periods, reversing a trend of net sales in place from mid-January.

Raw data from MiningPoolStats meanwhile shows that the Bitcoin network hash rate is also preserving its upward trend, remaining at over 300 exahashes per second (EH/s).

Bitcoin hash rate raw data table (screenshot). Source: MiningPoolStats

“Unstoppable!” commented economist and analyst Jan Wuestenfeld on the phenomenon as its 30-day moving average hit new all-time highs last week.

Joe Burnett, chief analyst at Blockware, describe hash rate growth as “really relentless”.

“The 14-day moving average of the total global hash rate now sits at ~290 EH/s. Bitcoin miners scour the Earth for cheap, wasted and excess energy,” he added alongside Glassnode figures.

Long-time Bitcoin market participants will remember the once-popular phrase, “price follows hash rate,” which posits that a sufficiently large uptrend in the hash rate has inevitable bullish implications for the market. BTC price action.

The most “greed” since Bitcoin’s all-time highs

$25,000 is a headache for reasons beyond strong resistance – going over could be an unsustainable move for Bitcoin.

Related: Bitcoin’s bullish price action continues to bolster rallies in FIL, OKB, VET, and RPL

The latest findings from research firm Santiment suggest that crypto market sentiment is getting too greedy around these multi-month highs.

“Bitcoin’s 8-month high yesterday was accompanied by great euphoria,” he said. commented on a graph showing social media activity.

“Maybe a little too much, because the positive comments on social platforms may have created a local top. Just as the negative comment on February 13 probably contributed to the bottom.

Annotated chart of Bitcoin sentiment. Source: Santiment/Twitter

The phenomenon is also visible on altcoins, with Santiment citing Dogecoin (DOGE) as a key example this month.

“This pattern of social volume and very positive sentiment towards Dogecoin perfectly illustrates how euphoria creates price highs. Regardless of your opinion of DOGE, the hype about this particular asset historically foreshadows market corrections,” said he declared. concluded.

The hugely popular Crypto Fear & Greed Index meanwhile shows that “greed” is the dominant flavor of sentiment across crypto this week.

The push to the highs for Bitcoin coincided with a reading of 62/100 for the index, marking new highs since the November 2021 push to $69,000 on BTC/USD.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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