“The Most Bullish Macro Background In 75 Years” – 5 Things To Watch For Bitcoin This Week

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Bitcoin (BTC) is starting a new week in a strange place – one eerily similar to what was last year around this time.

By what various sources have described as a full twelve months of “consolidation,” BTC / USD is around $ 42,000 – almost exactly where it was in the second week of January 2021.

The ups and downs in between have been significant, but essentially Bitcoin remains in the middle of a now familiar range.

The outlook varies depending on your perspective – some believe new all-time highs this year are more than possible while others call for many more months of consolidation.

With crypto sentiment at one of the lowest levels in history, Cointelegraph is taking a look at what could change the status quo in shorter periods of time in the coming days.

Will hold $ 40,700?

Bitcoin had a busy weekend as the latest in a series of abrupt downward moves drew 40,000 inches closer to support.

Data from Cointelegraph Markets Pro and TradingView showed BTC / USD hit $ 40,700 on major exchanges before bouncing, a correction that has been held since then.

Ironically, that same level was in focus on the same day in 2021, but it was reached during the more vertical phase of Bitcoin’s recent bull run.

Last September, focus also returned to $ 40,700, which acted as a tipping point after several weeks of correction and eventually resulted in BTC / USD climbing to an all-time high of $ 69,000.

Now, however, the chances of a collapse into the $ 30,000 zone are unreservedly higher among analysts.

“The week-end is just around the corner”, Rekt Capital summarized next to a diagram with target levels.

“In theory, there is a possibility that $ BTC could do a weekly close above ~ $ 43200 (black) to enjoy a green week next week. Weekly close below ~ $ 43,200 and BTC might revisit the red area below. “

BTC / USD annotated candle chart. Source: Rekt Capital / Twitter

Bitcoin eventually closed at $ 42,000 as it was hovering around that level, which could turn out to be temporary relief for the bulls.

“I think the market is making a lower high,” fellow trader and analyst Pentoshi forecast, added that he believes $ 40,700 will eventually fall.

An increasingly tempting target, meanwhile, is last summer’s $ 30,000 floor.

Consensus on dire outlook for cash

This week’s macro picture is especially complicated for fans of risk assets, with Bitcoin and Altcoins being no exception.

What the future holds, however, varies greatly from one expert to another.

It is widely seen that the US Federal Reserve will begin raising rates in the coming months, reducing investor risks and giving crypto bulls a headache. “Easy Money” that started flowing in March 2020 will now be much harder to come by.

The bearish view was neatly summed up by ex-BitMEX CEO Arthur Hayes in his latest blog post last week.

“Let’s forget what non-crypto investors believe; I read the opinion of crypto investors in such a way that they naively believe that the fundamentals of network and user growth throughout the complex will allow crypto assets to continue their upward trend unabated, ”he wrote.

“To me, this is the prerequisite for a serious washout, as the detrimental effects of rising interest rates on future cash flows are likely to cause marginal speculators and investors to ditch or greatly reduce their crypto holdings.”

US consumer price index (CPI) data for December is released this week, numbers that are likely to feed into the story of surprising inflationary gains.

Hayes is far from the only one worried about what the Fed could bring to cryptocurrency this year, with Pentoshi also calling for a temporary end to the bull run.

“And the final question is, can crypto ignore the Fed if it decides to do anything with a deflationary machete? I doubt it, ”concluded analyst Alex Krueger in a Series of tweets on the subject of this weekend.

“’Don’t fight the Fed’ goes both ways, up and down. If the Fed is too Hawkish, then Houston, we have a problem. “

There were still some optimists in the room. Dan Tapiero, founder and CEO of 10T Holdings, urged his followers to “ignore” the recent defeat and focus on an unchanged long-term investment opportunity.

“The most bullish macro background in 75 years,” he said said.

“The booming economy is supported by massive negative real interest rates. The Fed will never align rates with inflation. Stay long stocks and Bitcoin and ETH. Hodl due to short-term volatility. Cash savings in real dollars will continue to depreciate. “

Tapiero highlighted data compiled by Charlie Billello, Founder and CEO of Compound Capital Advisors.

RSI hits two-year lows

In the midst of the gloom, not everything points to a lengthy downturn specifically for Bitcoin.

As Cointelegraph has reported, on-chain indicators are calling up in droves – and the historical context supports those calls.

This week, it is Bitcoin’s Relative Strength Index (RSI) that continues to make headlines, hitting its lowest level in two years.

The RSI is a key metric used to determine whether an asset is “overbought” or “oversold” at a given price point.

A dip in depth at $ 42,000 suggests that such a level is really being viewed as too extreme by the market and a rebound should occur to make up for it.

In contrast, last January the RSI was sky high and, by contrast, well in the “overbought” territory while BTC / USD was trading at the same price.

“The Bitcoin RSI has been at its daily low for 2 years. March 2020 & May 2021 were the last. And people are turning around here in a bearish way / want to short ”, a hopeful Cointelegraph employee Michaël van de Poppe commented.

BTC / USD 1-day candle chart (Bitstamp) with RSI. Source: TradingView

Cointelegraph posted similar bullish indications on its monthly RSI chart last week.

Hash rate offsets losses in Kazakhstan

Another rash from last week that is already “healing” comes from the area of ​​Bitcoin basics.

After reaching new all-time highs in recent weeks, Bitcoin’s network hash rate plummeted when the turmoil in Kazakhstan affected internet availability.

Kazakhstan, which is home to around 18% of the hash rate, has since stabilized, with the hash rate largely returning to its earlier level of 192 exahashes per second (EH / s).

At one point down to 171 EH / s, responses to what may have reminded some of China’s mining ban last May appear to have raised the hash rate and maintained record-breaking miners’ participation.

Bitcoin’s network difficulty increased slightly this weekend despite the upheaval and is currently well on the way to doing this again with the next automated readjustment in just under two weeks.

Screenshot of the live Bitcoin hash rate graph. Source: MiningPoolStats

“Ascend forever,” on-chain analyst Dylan LeClair commented using the classic mantra “price follows hash rate”.

Related to this, China’s mining route caused the hash rate to drop by 50%. It took around six months to make up for the losses.

“What if…?”

Someone who has long said it was high time for a bitcoin trend reversal is the quant analyst PlanB, the creator of the stock-to-flow-based BTC pricing models.

Related: Top 5 Cryptocurrencies You Should See This Week: BTC, LINK, ICP, LEO, ONE

PlanB is currently defying a test of its creations – and the accompanying storm of criticism on social media – but remains more optimistic than most when it comes to medium to long-term price promotions.

“I know that some people have lost faith in this bitcoin bull market,” he said accepted this weekend.

“However, we are only in the middle of the cycle (2020-2024). And although BTC experiences some turbulence at 1 ton, the yellow gold cluster at S2F60 / 10 T US dollars (small black dots are gold data from 2009-2021) is still the IMO’s target. “

Stock-to-flow cross asset chart (S2FX). Source: PlanB / Twitter

He was referring to the stock-to-flow value for Bitcoin, gold and other assets as part of his stock-to-flow cross-asset model (S2FX), which had an average BTC / USD price of $ 288,000 during the current halving calls for circulation.

Closer to home, however, a simplified comparison between Bitcoin in this cycle and its two previous ones saw a feasible path that is now beginning with an about-face.

A separate model, the Floor model, which charged $ 135,000 per bitcoin by the end of December, has now been discarded after failing to meet its target for the first time in November.