Bitcoin (BTC) is starting the final week of January in a place no one wanted but many warned about — a 50% drawdown from all-time highs.A flight to $3
Bitcoin (BTC) is starting the final week of January in a place no one wanted but many warned about — a 50% drawdown from all-time highs.
A flight to $34,000 means that BTC/USD is now down by half in just two months, and perhaps naturally, concerns are that the losses could continue.
With $30,000 so far unchallenged, Bitcoin remains slightly above the trough of its dip from $58,000 to $29,000 last summer.
With macro markets facing a tough time of their own thanks to rapidly-changing Federal Reserve policy, crypto holders will be eyeing their coins’ correlation to traditional assets going forward. Can Bitcoin break the trend?
So far, there are few signs that a significant rebound is on the cards, but below the headlines, not all is as it seems when it comes to Bitcoin’s strength.
Cointelegraph presents a look at five areas worth taking note of this week when assessing what could be next for BTC price action.
Bitcoin nears a “generational bottom”
Bitcoin bears took no notice of out-of-hours trading on Wall Street with the weekend ushering in a new round of losses.
From $39,000 to current lows of $34,000, BTC showed no mercy as liquidations mounted and sentiment took a fresh beating.
Now, traders are naturally eyeing a test of $30,000 as a more definitive representation of how Bitcoin is likely to fare in the short to mid-term.
Other estimates for where some relief may occur previously lay at $33,000 and $31,500, these likewise yet to be reached.
Analyzing various aspects of the on-chain situation, Dylan LeClair, senior analyst at UTXO Management, highlighted Bitcoin’s current cost basis as a potential clue for what he calls a “generational bottom.”
Cost basis refers to the aggregate price at which bitcoins from various cohorts of investors were last moved. The calculation, when combined with other data, can give an insight into where a Bitcoin bear phase is likely to bottom out.
Currently, the network cost basis is $24,000. The ratio of cost basis to price, known as the market value to realized value (MVRV) ratio, likewise has further room to fall before putting in a classic floor signal of its own.
The current MVRV ratio is in the 38th percentile of historical readings.
In the past $BTC dips below realized price (MVRV below 1.0) have served as generational buying opportunities.
It’s anyones guess if we get to 24k, but it would certainly be extremely attractive to buy.
8/ pic.twitter.com/sW35OEt0I4— Dylan LeClair (@DylanLeClair_) January 24, 2022
Closer to home and a familiar target for BTC/USD is emerging in the form of a CME futures gap.
While a wick to just above $36,000 on Friday spoiled the opportunity for Bitcoin to reclaim levels closer to $40,000 as part of a “gap fill,” a lower gap from July remains at around $32,000.
“The actual price action will happen at the start of the new week, when futures open and CME starts to trade,” Cointelegraph contributor Michaël van de Poppe forecast.
Futures “gaps” refer to the empty space on CME Group’s futures chart between the end of trading on Friday and the start on the following Monday. If spot price moves in the intervening period, it has a habit of returning to “fill in” the gap, this often occurs within days or even hours.
Spotlight on RSI
Over the weekend, Cointelegraph reported on Bitcoin’s daily relative strength index (RSI) metric nearing its lowest levels since the coronavirus crash of March 2020.
Well below even its classic “oversold” zone, RSI is now becoming one of the most convincing signals for analysts keen to put faith in a market rebound.
Bitcoin daily RSI at its lowest since March 12th, 2020 (covid crash)
— Will Clemente (@WClementeIII) January 22, 2022
Not just daily, but weekly RSI is now de facto back where it dipped to almost two years ago. Thereafter, those who followed it profited big, as the next year saw practically unbridled BTC price gains.
RSI refers to how overbought or oversold an asset is at a given price point, and the current low readings thus lend weight to the idea that $35,000 does not accurately reflect Bitcoin’s value.
For popular Twitter trader and analyst TechDev, the numbers stack up, with RSI on the weekly chart within a hair of classic reversal zones from earlier in Bitcoin’s history.
Current #BTC weekly RSI: 37
All bear bottoms: 29-35
March 2020 crash: 35
Closer to a bottom than a top imo. GN all. pic.twitter.com/MzyLNnJ6IT
— TechDev (@TechDev_52) January 23, 2022
“Monthly RSI approaching levels that have been historically some of the best buying opportunities in its entire history,” fellow analyst Matthew Hyland added alongside a chart of his own.
On both higher and lower timeframes, Bitcoin RSI is therefore hinting that current price levels are unsustainable.
Miners hold firm… so far
Another phenomenon which could be subtly flagging $35,000 Bitcoin as…
cointelegraph.com