Could 2022 still turn out to be a growth year? Not many believe so this week, analysts said, but the short-term volatility will pass.
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Bitcoin (BTC) started a new week in an odd place – a week uncanny similar to this time last year.
After what various sources have described as an entire twelve months of “consolidation,” BTC/USD is at around $42,000 – almost exactly where it was in the second week of January 2021.
The ups and downs in between are substantial, but fundamentally, Bitcoin remains in the middle of a now-familiar range.
The outlook varies by opinion – some believe new all-time highs are possible this year, while others are calling for more months of consolidation.
With crypto sentiment at some of its historic lows, Cointelegraph will take a look at what could change the status quo on a shorter timeframe in the coming days.
Will $40,700 hold?
Bitcoin saw a challenging weekend as it was the last in a series of abrupt downward moves that saw the $40,000 support a little closer.
Data from Cointelegraph Markets Pro and TradingView shows BTC/USD hitting $40,700 on major exchanges before bouncing up, a correction that has held since.
Ironically, the same level of focus on the same day of 2021, however, came within what turned out to be a more vertical phase of Bitcoin’s recent bull run.
Last September also brought the focus back to $40,700, which acted as a turning point after several weeks of correction and ultimately saw BTC/USD climb to an all-time high of $69,000.
Now, however, analysts have an amazing chance of breaking the $30,000 zone higher.
“The Week Is Near,” Rekt Capital summary along with a chart with target levels.
“There is a theoretical possibility that $BTC could do a Weekly Close above ~$43200 (black) to enjoy a green week next week. Weekly close below $43200 however & BTC could re-visit the red area below. ”
Bitcoin finally closed at $42,000, as swinging around that level in what could turn out to be some temporary relief for the bulls.
“I think the market is making lower highs,” said fellow analyst and trader Pentoshi forecast, adding that he believes $40,700 will eventually drop.
Meanwhile, an increasingly attractive target lay at the $30,000 floor last summer.
Consensus forming on dire outlook for cash
The macro picture this week is especially complicated for fans of risk assets, with Bitcoin and altcoins no exception.
However, what the future holds varies considerably from one expert to another.
The U.S. Federal Reserve is expected to begin raising interest rates in the coming months, which will reduce investor risk and cause headaches for crypto bulls. The “easy money”, which started flowing in March 2020, will now be much harder to earn.
The bearish view was summed up by former BitMEX CEO Arthur Hayes in his latest blog post last week.
“Forget what non-crypto investors believe; I have read about the sentiment of crypto investors that they believe that the network fundamentals and user growth of the entire complex will allow the crypto asset to continue on its trajectory. their growth without decline,” he wrote.
“To me, this represents the setup for a serious washout, as the pernicious impact of a rate hike on future cash flows will likely spur speculators and investors to sign funds dumped or severely reduced their holdings.”
This week, US consumer price index (CPI) data for December is released, numbers that will likely lead to a story of unexpected inflation.
Hayes is no longer alone in worrying about what the Fed can bring to crypto this year, with Pentoshi among others also calling for a temporary end to the bull cycle.
“And the final question is, can crypto bypass the Fed if it decides to go all out using the deflation knife? I doubt it,” concluded analyst Alex Krueger in a blog post a bunch of tweets about 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 some optimists left in the room. Dan Tapiero, Founder and CEO of 10T Holdings, told followers to “ignore” the recent roadmap and focus on the unchanged long-term investment opportunity.
“The most bullish macro backdrop in 75 years,” Mr. speak.
“The booming economy is supported by a large negative real exchange rate. The Fed will never balance interest rates with inflation. Hold stocks long term and Bitcoin and ETH. Hodl through short-term volatility. Cash savings in US dollars will continue to depreciate.”
Here’s a look at the Fed’s Effective Funding Rate and Inflation Rate when Unemployment was at 3.9%, as it is today.
Find outsiders… pic.twitter.com/zU1zRj1uXC
– Charlie Bilello (@charliebilello) January 7, 2022
Tapiero highlights data compiled by Charlie Bilello, founder and CEO of Compound Capital Advisors.
RSI hits two-year low
Amid the gloom, not everything points to an extended bearish phase for Bitcoin specifically.
As Cointelegraph reported, on-chain indicators are calling for the upside – and the historical context supports those demands.
This week, Bitcoin’s relative strength index (RSI) continues to stand out, hitting a two-year low.
#Bitcoin The RSI has been at this low only 2 other times in the past 2 years. Looks like a bottom has come and bounced. Let’s see pic.twitter.com/qhQ1pD8yEl
– Bitcoin Archive (@BTC_Archive) January 9, 2022
RSI is a key metric used to determine whether an asset is “overbought” or “oversold” at a given price.
The deep drop at $42,000 shows that such a level is indeed considered too extreme by the market and a rally will occur to balance it.
In contrast, last January, the RSI was sky-high and conversely also in the “overbought” zone, while BTC/USD was trading at the same price.
“Bitcoin RSI is at a 2-year low on a daily basis. March 2020 and May 2021 are final batches. And people reverse the downtrend here / want to sell short,” a hopeful Cointelegraph contributor Michaël van de Poppe commented.
Cointelegraph recorded similar bullish signs on the monthly RSI chart last week.
Hash rate offsets Kazakhstan’s losses
Another bright spot from last week that has “cured itself” comes from the area of Bitcoin fundamentals.
After hitting new all-time highs throughout recent weeks, Bitcoin’s network hash rate took a hit as chaos in Kazakhstan included Internet availability.
Kazakhstan, home to about 18% of the hash rate, has since stabilized, allowing the hash rate to virtually return to its previous level of 192 exahashes per second (EH/s).
Having dropped to 171 EH/s at one point, the responses to what may have reminded some of China’s mining ban last May seem to have raised the hash rate and maintained the participation of the crypto community. record-breaking digger.
Bitcoin’s network difficulty, despite its volatility, posted modest gains this weekend and is now on track to do so again at the next automatic correction in less than two weeks.
“Up Forever,” on-chain analyst Dylan LeClair commented about the classic mantra, “price to hash rate”.
For context, the Chinese mining process causes the hash rate to drop by 50%. It took about six months to cover the losses.
“What if…?”
One person who has long said that the time has come for a Bitcoin trend reversal is quantum analyst PlanB, who creates stock-based BTC price models that follow flow.
Related: Top 5 Cryptocurrencies to Watch this Week: BTC, LINK, ICP, LEO, ONE
Now passing the test of his creations — and the accompanying storm of social media criticism — PlanB remains more upbeat than most when it comes to mid- to long-term price action.
“I know some people have lost faith in this bitcoin bull market,” he admit this weekend.
“However, we are only halfway through the cycle (2020-2024). And even though BTC experiences some volatility at $1T, the yellow cluster at S2F60/10T (small black dot is 2009-2021) gold data remains an IMO target. ”
He is referring to the value from stocks to the outflow of Bitcoin, gold, and other assets as part of his cross-flow asset model (S2FX), which claims a BTC/USD price averaged $288,000 during the current bike halving.
Closer to home, however, a simpler comparison of Bitcoin this cycle and its previous two shows a possible trajectory starting with a turn now.
What happens if… pic.twitter.com/te36HkFAbQ
– PlanB (@ 100trillionUSD) January 9, 2022
A separate model, the exchange model, which demanded $135,000 per bitcoin at the end of December, has now been scrapped after failing to hit its target for the first time in November.