A “snap back” to $20K? 5 things to know in Bitcoin this week
Bitcoin (BTC) starts 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 with bulls still lacking momentum.
The biggest cryptocurrency saw what looked like the next phase of its 2023 recovery last week, with rapid gains and even new six-month highs.
However, the good times were not to continue, and February’s progress has been much slower and hard-won than January’s 40% gains. How will the rest of the month be?
A critical monthly close is on the way, along with a potential external price trigger in the form of US Federal Reserve minutes.
Meanwhile, the underlying Bitcoin network is set to jump to yet another all-time high, and miners are in full recovery mode.
Cointelegraph takes a look at these factors and more in an overview of BTC price prospects for the last week of February.
RSI “bearish divergence” causes alarm
After a mostly calm start to the weekend following days of macroeconomic data reactions, Bitcoin woke up late Sunday to climb back above $25,000.
However, this was not to last and as Cointelegraph reported, the exchange order books showed signs of manipulative moves by high volume traders.
A subsequent comedown after the weekly close took BTC/USD below $24,000 before a return to levels similar to Saturday, where the pair was still trading at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.
For traders there was naturally enough reason to be on guard.
“Don’t pay much attention to this weekend’s PA..BTC usually saves its meaningful moves for US trading hours,” Crypto Chase wrote in part of a Twitter digest.
Monitoring resource materials indicators, which initially flagged the order book activity, meanwhile raised questions about how long the phenomenon could continue with bulls powerless to make the cut higher.
An additional diagram of the Binance order book confirmed that support for larger bids, known as a “bid wall,” had moved lower to $23,460, giving the spot price room to drift lower next door.
Fellow trader and analyst Matthew Hyland, meanwhile, admitted that it was “really hard to tell” whether Bitcoin could break higher in short time frames.
Holding the $22,800 area in the event of a pullback, followed by the key breakout, “wouldn’t surprise me,” he so on the day.
More concerned about the strength of the rally was Venturefounder, a contributor to the chain analysis platform CryptoQuant.
In a Twitter thread, he warned that even external factors such as “macro weakness” could have an immediate bearish impact on crypto markets.
“Bitcoin Bearish RSI Divergence Continues … Almost Opposite of May-July 2021 Period. I Think Any Macro Weakness Could Make BTC Spin Back To $19-20k Very Quickly,” part of the comments tired.
Venturefounder referred to the relative strength index (RSI), which measures how overbought or oversold an asset is at a given price point. In 2021, the RSI increased against a BTC price correction and this then ended with current highs of $69,000 in November of that year.
All eyes on FOMC minutes and US dollar
What form this “weakness” in the macro markets may take remains to be seen.
The coming week has significantly fewer potential macro triggers than the last, 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 experts’ radar is the release of the minutes of February’s Federal Open Market Committee (FOMC) meeting at the Fed.
It was here that the last benchmark interest rate increase was decided, and expectations now are that Fed chairman Jerome Powell has included talk of a moratorium on interest rate increase policy – if only theoretically.
“We also have the FOMC minutes on Wednesday where Powell will describe what a ‘pause’ for rate hikes might look like,” Crypto Chase said of the event.
“In the middle of the coming week, I’ll start considering swing features.”
Not everyone is convinced that the FOMC minutes will be straightforward. Among them is financial market research resource Capital Hungry, which this week warned that “sneaky hawkish audits” could be exposed.
“Fed sneaks in hawkish revisions out of spotlight (not an active FOMC) with market already adjusted to CPI revisions and Jan report. PCE data feeds into elevated inflation sentiment,” it argued in part of the Twitter commentary.
Any reversal of inflationary trends would be a boost to US dollar strength, which spent the last macro trading day last week erasing earlier gains.
Matthew Dixon, founder and CEO of crypto valuation 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: moving average “cloud” is there to be broken
As Cointelegraph continues to report, Bitcoin bulls have a problem that is becoming increasingly apparent on short time frames – the 200-week moving average (WMA).
A classic “bear market” trend line, the 200WMA has served as resistance since mid-2022, and BTC/USD has spent more time below it than ever before.
Regaining the level would mark an eye-catching achievement, but so far all attempts have met with flat rejection.
“If Bitcoin manages to break above the 200-week MA cloud, which is becoming increasingly likely, we’re going to see a lot more TradFi coverage of crypto again,” Caleb Franzen, senior market analyst at Cubic Analytics, in summary in the weekend.
Franzen additionally showed the levels at stake in the near term, with the $25,200 ceiling in need of a breakout.
However, the “cloud” he referred to involves more than just the 200WMA – Bitcoin’s 50WMA is currently at $24,462, coinciding exactly with today’s spot price focus.
In addition, requests on exchange order books are stacked around the 200WMA, adding to the challenges of turning it from resistance to support.
In research published on February 18, Franzen described the WMA cloud as one of “two important signals to add more bullish fuel to the fire” along with realized price.
“BTC rejected this dynamic area for the first time in August 2022 and was briefly rejected at this level earlier this week. While it may break over on this second attempt?” he asked.
Hash rate, difficulty in queue for fresh records
In a familiar silver lining, Bitcoin’s network fundamentals keep the bullish sentiment firmly intact as the month draws to a close.
The next automatic readjustment will have trouble adding an estimated 10% to the existing count. This would reverse the previous readjustment’s modest decline to send difficulties to new records.
This is a key yardstick for gauging Bitcoin miner sentiment, as such large increases suggest corresponding progress in the competition for block subsidies.
It comes on the back of increasing coverage of so-called “ordinals” fees, with profitability for miners clearly recovering after months of pressure.
Data from the chain analysis company Glassnode confirms this. Miners have started keeping more BTC than they sell on rolling monthly timeframes, it shows, reversing a trend of net sales in place since mid-January.
Raw data from MiningPoolStats, meanwhile, shows that the Bitcoin network’s hash rate is also maintaining its upward trend, staying at over 300 exahashes per second (EH/s).
“Unstoppable!” economist and analyst Jan Wuestenfeld commented on the phenomenon as its 30-day moving average climbed to new all-time highs last week.
Joe Burnett, Principal Analyst at Blockware, described hash rate growth as “truly relentless.”
“The 14-day moving average of total global hashrate now stands at ~290 EH/s. Bitcoin miners are hunting the Earth for cheap, wasted, redundant energy,” he added along with the Glassnode figures.
Long-time Bitcoin market participants will recall the once-popular phrase, “price follows hash-rate,” which postulates that a large enough hash-rate uptrend has inevitable bullish implications for BTC price action.
Most “greed” since Bitcoin all-time highs
$25,000 is a headache for reasons beyond solid resistance – breaking above it could be an unsustainable move for Bitcoin.
Related: Bitcoin’s bullish price action continues to strengthen rally in FIL, OKB, VET and RPL
The latest findings from research firm Santiment suggest that at around these multi-month highs, sentiment in the crypto market is simply getting too greedy.
“Bitcoin’s 8-month high yesterday came with a large amount of euphoria,” it commented on a chart showing activity on social media.
“Perhaps a little too much, as the positive comment on social platforms may have created a local spike. Just like the negative comment on February 13 probably contributed to the bottom.”
The phenomenon is also visible on altcoins, with Santiment highlighting Dogecoin (DOGE) as a key example this month.
“This pattern of social volume and highly positive sentiment towards Dogecoin perfectly illustrates how euphoria creates price spikes. Regardless of your opinion on DOGE, hype about this asset historically heralds market corrections,” concluded.
The ever-popular Crypto Fear & Greed index, meanwhile, shows “greed” as the overriding sentiment across crypto this week.
The push to the tops for Bitcoin coincided with a 62/100 reading for the index, marking new period highs since the November 2021 push to $69,000 on BTC/USD.
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.
