Is BTC Price About To Retest $20K? 5 things to know in Bitcoin this week

Bitcoin (BTC) enters the second week of February in a recent bearish mood as multi-month highs fail to hold.

In what may yet bring vindication to those predicting a big BTC price drop, BTC/USD is back below $23,000 and making lower lows on hourly time frames.

February 6 trading may not yet be underway in Europe or the US, but Asian markets are already falling and the US dollar is rising – potential further hurdles for Bitcoin bulls to overcome.

With some macroeconomic data coming out of the Federal Reserve this week, attention is mainly focused on next week’s inflation check in the form of January’s Consumer Price Index (CPI).

In the build-up to this event, the outcome of which is already highly contested, volatility may gain a new foothold across risk assets.

Add to the concerns mentioned above that Bitcoin is long overdue for a more significant retracement than those seen in recent weeks, and the recipe is there for difficult but potentially lucrative trading conditions.

Cointelegraph looks at the situation for Bitcoin this week and considers the factors at play to move the markets.

BTC price disappoints with weekly close

It is very much a tale of two Bitcoins when it comes to analyzing BTC price action this week.

BTC/USD has managed to retain the majority of its spectacular January gains, totaling almost 40%. At the same time, there are signs of a comedown on the cards.

Although relatively strong at just under $23,000, the weekly close still failed to beat the previous one and represented a rejection of a key mid-2022 resistance level.

“BTC fails its ~$23400 retest currently,” popular trader and analyst Rekt Capital in summary on the topic of 5 Feb.

An accompanying weekly chart highlighted the support and resistance zones in play.

“Important BTC could weekly close above this level for a chance to the upside. August 2022 shows that a failed retest could see BTC fall deeper into the blue-blue area,” he continued.

“Technically speaking, retest still in progress.”

As Cointelegraph reported over the weekend, traders are already betting on where a potential pullback could end up — and which levels could act as definitive support to further strengthen Bitcoin’s newfound bullish momentum.

These are currently around $20,000, a psychologically significant number and the location of Bitcoin’s old all-time high from 2017.

BTC/USD was trading at around $22,700 at the time of writing, data from Cointelegraph Markets Pro and TradingView showed, and continued to push lower in Asian trading hours.

“Some bids were filled on this recent push-down (green box), but most of the remaining bids below have been pulled (red box),” trader Credible Crypto wrote on order book activity on 5 February

“If we continue lower here, we still see the 19-21k region as a logical bounce zone.”

For a calmly confident Il Capo of Crypto, meanwhile, it is already crunch time when it comes to the trend reversal. A supporter of new macro levels throughout the January rallies, the trader and social media expert argued that breaking below $22,500 would be “bearish confirmation.”

“The current bear market rally has created the perfect environment for people to continue to buy all the dips when the current trend reverses,” he wrote during a Twitter debate.

“Perfect scenario for a capitulation event in the next few weeks.”

Fed officials to speak as the market eyes the CPI

The week in macro looks decidedly calm compared to early February, with less data and more commentary set to define sentiment.

That comment will come courtesy of Fed officials, including Chairman Jerome Powell, with a hint of policy change in their language that could lead to shifting markets.

The previous week saw just such a phenomenon play out, as Powell used the word “disinflation” no fewer than fifteen times during a speech and Q&A accompanying the Fed’s move to adopt a 0.25% rate hike.

Ahead of new key data next week, there is talk in analytical circles about how and when the Fed might move from a restrictive to an accommodative economic policy.

As Cointelegraph reported, not everyone believes that the US will make a “soft landing” when it comes to lowering inflation and will instead experience a recession.

“Don’t be surprised if the term ‘soft landing’ exists for a while before the curtain is pulled in Q3 or Q4 this year,” concluded investor Andy West, co-founder of Longlead Capital Partners and HedgQuarters, in a dedicated Twitter thread in the weekend.

Meanwhile, further analysis claims it could be a case of business as usual, with smaller rate hikes following Powell’s “mini victory lap” over falling inflation.

“Personally, my belief is that the Fed will most likely hike by +0.25% in the next two meetings (March and May),” Caleb Franzen, senior market analyst at CubicAnalytics, wrote in a Feb. 4 blog post.

“Of course, any future actions by the Fed will depend on the continued development of inflation data and broader macroeconomic conditions.”

Franzen acknowledged that while recession was not currently an appropriate description of the U.S. economy, conditions could still worsen going forward, citing three such instances in recent years.

Closer to home, next week’s CPI release is already on the radar for many. The extent to which January’s data supports the easing inflation narrative should be the key.

“After the FOMC, we have a bunch of second-level data releases, including key ISM services and NFP,” trading firm QCP Capital wrote in a guidance sent to Telegram channel subscribers last week.

“But the decision will be the Valentine’s Day CPI – and we think there are upside risks to this release.”

Mine “relief” contrasts with BTC sales

In the case of Bitcoin, basic networks currently offer some stability in the midst of a turbulent environment.

According to current estimates from BTC.com, the difficulty is stable at all-time highs, with only a modest negative shift forecast in six days.

This could well end up positive depending on the Bitcoin price action, and a look at hash rate data suggests that miners remain in fierce competition.

A countertrend comes in the form of miners’ financial behavior. The latest data from on-chain research firm Glassnode shows that sales of BTC by miners continue to increase, and their reserves fall faster over 30-day periods.

The reserves equaled theirs lowest in a month on February 6, with the miners’ balance at 1,822,605,594 BTC.

Overall, however, the current pricing measures have brought “relief” to miners, said Philip Swift, co-founder of trading suite Decentrader.

In a chirping last week, Swift referred to the Puell Multiple, a measure of the relative value of mined BTC, which has left its “capitulation zone” to reflect better profitability.

“After 191 days in the capitulation zone, the Puell Multiple has gathered. Shows relief for miners via increased revenue and likely reduced selling pressure,” he commented.

NVT suggests that volatility will kick in

Some chain data is still surging ahead despite the slowdown in BTC price gains.

Of interest this week is Bitcoin’s Network Value to Transaction Signal (NVT), which is now on levels not seen for almost two years.

The NVT signal measures the value of BTC transferred on-chain against the market value of Bitcoin. It is an adaptation of the NVT ratio indicator, but uses a 90-day moving average of transaction volume instead of raw data.

NVT at multi-year highs could be cause for concern – network value is relatively high compared to transferred value, a scenario that could prove to be “unsustainable”, in the words of its creator, Willy Woo.

As Cointelegraph reported late last year, however, there are several nuances to NVT that make its various incarnations diverge from each other to provide a complex picture of value on the chain at a given price.

“Bitcoin’s NVT shows indications of value normalization and the start of a new market regime,” Charles Edwards, CEO of crypto investment firm Capriole, commented about a further tweak of NVT, called dynamic range NVT, on February 6.

– The message is the same throughout history, and most often it is good news in the medium and long term. In the short term, this is where we typically see volatility.”

Small Bitcoin Wallet Shows ‘Trader Optimism’

In a glimmer of hope, blockchain research firm Santiment notes that the number of smaller Bitcoin wallets has increased this year.

Related: Bitcoin, Ethereum and select altcoins set to resume rally despite February slump

Since BTC/USD crossed the $20,000 mark again on January 13, 620,000 wallets with a maximum of 0.1 BTC have reappeared.

This event, says Santiment, marks the moment when “FOMO returned” to the market, with the subsequent growth in wallet numbers meaning these are at their highest since November 19, 2022.

“There have been ~620,000 small Bitcoin addresses that have resurfaced on the network since FOMO returned on January 13th when the price regained $20,000,” Twitter comment confirmed on February 6.

“These addresses of 0.1 BTC or less grew slowly in 2022, but 2023 shows a return of trader optimism.”

A look at the Crypto Fear & Greed Index, meanwhile, shows that “greed” remains the primary descriptor of market sentiment.

On January 30, the index hit its “greediest” since Bitcoin’s November 2021 record.

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.