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5 things to keep in mind about bitcoin this week

by archyde

The main cryptocurrency, bitcoin (BTC) starts a new week with a bang, but not in the right direction for the bulls.

A promising weekend, however, saw the BTC/USD pair receive warnings about spurious “after hours” price movements, which ultimately proved timely as the weekly close sent the pair down over $1,000.

At $37,900, even that close was not enough to meet analyst demands., and the all-too-familiar range behavior that bitcoin has exhibited throughout January continues.

The question for many, then, is what will change the status quo.

Amid the lack of a true spot market recovery, despite strong on-chain data, it may be an external trigger that ends up being responsible for a shakeout. For example, the United States executive order on the regulation of cryptocurrencies is scheduled for February, although the exact timing is unknown.

The Federal Reserve is another area of ​​interest for analysts, as Any indication of inflation, interest rate hikes, or reduced asset purchases could significantly affect traditional markets, with which bitcoin and altcoins remain closely correlated.

With frustrating times characterizing the first month of 2022, Cointelegraph takes a look at the state of the market this week.

We’ve identified five things worth keeping in mind when figuring out bitcoin’s next moves.

The weekly close of BTC

Even Meager gains at the weekly close were a short-lived reason to celebrate for bitcoin bulls this Sunday.

Midnight UTC saw an immediate rejection candlestick; the BTC/USD pair fell to $36,650 on Bitstamp.

As noted by trader, analyst, and podcast host Scott Melker, strong volume accompanied the move, underscoring the dodgy nature of weekend price action when it comes to building a position.

Like other sources last week, Melker reiterated that a recovery to the $39,600 level is needed for a more bullish outlook to prevail.

Just as uninspired by the weekly candlestick was fellow trader and analyst Rekt Capital, who in a new twitter update said that BTC “continues to struggle with resistance at $38,500.”

“This is the area where BTC needs to break as far as weekly candle closes to lock in the upside beyond $39,000“, he added.

With a disappointing performance behind him, bitcoin is back in the same old range, one that some warn could still lead to a retest of lower levels.

“Personally, I look forward to any opportunity to increase value if we trade in this range of $29-40,000 for a long time.”, confirmed the popular trader Pentoshi.

The trip to the highs around $38,600 managed to lift the financing rates of derivatives, which were previously negative, as sentiment quickly moved from expecting more declines to expecting a continuation of the upside.

But nevertheless, the turnaround turned funding rates back into negative, and at the time of writing most of them were below neutral.

Chart of BTC funding rates. Source: Coinglass

Can the S&P 500 beat the worst month since March 2020?

While bitcoin’s monthly close is not yet set to bring any surprises, stock markets can provide some last-minute relief.

With futures rising ahead of Monday’s session, the S&P 500, with which bitcoin has shown a growing positive correlation in recent months, is headed for its worst monthly performance since March 2020.

The S&P is down 7% this month, echoing the jittery start to the year for bitcoin as it Fed policy is beginning to affect the enthusiasm that accompanied the unprecedented provision of liquidity at the onset of the Coronavirus pandemic.

S&P 500 1-hour candlestick chart. Source: TradingView

While the Federal Reserve is adamant about the timing of rate hikes it should follow, closer to home Another problem looms for Bitcoiners.

The next executive order of the Biden administration on cryptocurrencies, apparently ahead of February, could cause problems once again in terms of the already battered sentiment.

the spectrum of Infrastructure Law remains for many market participants, and a more disadvantageous treatment of the cryptophenomenon, very badly received by a country that now hosts the Most of bitcoin mining hash rate.

According to a report from Bloomberg from last week, the order should focus on the “risks and opportunities” offered by cryptocurrencies.

The plans have already seen “multiple meetings” with officials, ostensibly aimed at unifying governments’ regulatory approaches. in the cryptocurrency space.

Veterans age well

Behind the scenes, the most comforting trend of bitcoin veterans holding on to their assets continues.

On-chain analytics company data Glassnode confirm this week that the number of coins last moved five to seven years ago has reached an all-time high.

That cohort of coins now stands at 716,727 BTC.

Bitcoin supply was last active five to seven years ago on the BTC/USD chart. Source: Glassnode/Twitter

At the same time, The month of January has seen an overall decline in bitcoin exchange reserves despite price losses. According to data the glass node, major exchanges have lost around $243 million this week alone.

Previously, Cointelegraph reported about the ongoing drop in BTC reserves from exchanges.

The separate numbers of CryptoQuant, which track 21 major exchange platforms, further confirm that balances are at their lowest point since 2018.

Graph of balances of bitcoin exchanges against the pair BTC / USD. Source: CryptoQuant

GBTC sinks to record 30% discount

Things are not going too well for the Grayscale Bitcoin Trust (GBTC).

Despite data showing the resurgence institutional interest in bitcoin in January, demand for the industry’s flagship BTC investment product continues to decline.

According to data from the on-chain analysis company Coinglass, last week GBTC traded at the largest discount in its history relative to the spot price of Bitcoin.

Chart of premiums, shares and prices of GBTC markers. Source: Coinglass

This discount to net asset value (NAV) -the fund’s BTC holdings- used to be a first that investors were paying for exposure, but now, the tables have turned a lot.

On January 22, new entrants were technically able to buy GBTC shares at almost 30% below the day’s spot price.

What reported, Cointelegraph, GBTC has faced a rapidly changing environment in recent months, thanks to a combination of price action and the launch of exchange-traded funds (ETFs). GBTC itself is on the verge of becoming a spot ETF, but only with the approval of US regulators.

Specifying the situation, on-chain analyst Jan Wuestenfeld said that, despite the discount, GBTC did not necessarily represent a way for institutional investors to benefit from “easy money” in the long run.

“Yes, if you think it will become a spot ETF at some point, but you also have to take into account the commissions and that you don’t really have the keys,” he said as part of a debate on Twitter weekend.

Isn’t there as much fear as believed?

Reliable or not something is happening with bitcoin on-chain sentiment this week.

after passing almost the whole month of january into the depths of “extreme fear”, accompanied by a revisit to rare lows seen only a handful of times, the Cryptocurrency Fear and Greed Index is finally looking up.

On Sunday, the index broke out of the “extreme fear” zone – a reading between 0 and 25 – for the first time since January 3.

The Fear and Greed Index uses a basket of factors to determine overall market sentiment, and its range of highs and lows have accurately represented the price extremes.

The fact that a more positive mood is finally setting in is a positive sign for analysts, but, as always, everything depends on that recovery being sustainable and not interrupted by external surprises.

The party turned out to be short-lived, as the weekly closing hammer candle returned the readings to “extreme fear”.

However, with a brief trip to 29 – “fear” – the Index avoided the dubious honor to spend the longest time in history in the “extreme fear” zone since it was created in 2018.

Fear and greed index of cryptocurrencies. Source: Alternative.me

The fickle nature of sentiment in general, meanwhile, was not lost on the veteran trader. Peter Brandt, who over the weekend teased how the outlook has changed since the price correction began.

With November’s all-time highs as the focal point, Brandt described the last half of 2021 as the “Age of Laser Greed”.

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