Bitcoin is above $17,000, but traders are wary ahead of CPI, Fed statements, and a Digital Currency Group crisis.
With BTC price movement reaching one-month highs, Bitcoin is off to a promising start this week. Will it hold?
The weekly close gives reason for hope, as BTC/USD is currently trading at levels not seen since mid-December, giving bulls a new year’s lift.
The move comes before of a notable macroeconomic week for the cryptocurrency markets, which will include the release of the US Consumer Price Index (CPI) data for December 2022.
Inflation is a hot topic in the economy, and Federal Reserve Chair Jerome Powell will also speak on it.
Inside the crypto community, the FTX epidemic persists, with Digital Currency Group (DCG) at war with institutional clients over how it handled the solvency issues at Genesis Trading, a subsidiary.
Under the hood, however, Bitcoin is still showing signs of recovery from the FTX volatility, with miners among those benefiting.
As the second trading week of January begins, CoinRegency examines these elements as well as others.
Bitcoin reaches $17,000
At the weekly close on January 9, Bitcoin was able to rocket higher, reaching levels that had not been seen on the chart since December 16.
According to CoinRegency Markets Pro and TradingView data, Bitstamp’s local highs have reached $17,250.
Despite just adding a few hundred dollars, the movement on BTC/USD was notable due to the incredibly condensed trading range that had been in place for many weeks prior.
However, traders were hesitant to adjust their longer-term conservative perspective in light of a likely continuance.
In an update that day, Crypto Tony wrote to his Twitter followers, “Onwards and upwards to my $17,300 – $17,500 target”:
Michal van de Poppe, the founder and CEO of the trading firm Eight, also left room for a little amount of further upside, but he cautioned that the beginning of the week would be difficult.
Along with an explanation chart, he affirmed, “Still watching a case like this on Bitcoin:
Investors were advised to zoom out by Venturefounder, a contributing analyst at on-chain analytics platform CryptoQuant.
He admitted, “Bitcoin has been stuck between $16k and $18.5k for 2 months now.
CPI returns are decreasing as risk asset traders target volatility.
This week, with the release of the Consumer Price Index (CPI) print for December, all eyes—including those of the Federal Reserve—are on inflation figures.
The CPI, which will open markets on January 12, is a crucial part of Fed policy, and both traders and experts are well aware that its signals might cause the Fed to change its attitude.
The CPI has been falling recently, which suggests that the Fed’s recent interest rate increases have had a positive effect on inflation.
Hopes that the Fed will slow down rate hikes more quickly or maybe stop them altogether will rise should this continue or even decline more than anticipated.
As a result, there is a window for risk assets, such when cryptocurrency, to benefit as Fed policy easing sparks a demand for risk.
“Expecting enormous volatility. Huge cash position and light position size for me,”According to Ted Zhang, a trader and research researcher at Revere Asset Management, the CPI event was a“huge week.”
Others pointed out the odd timing of the CPI schedule, with the data arriving two days after Fed Chair Jerome Powell’s economic statement.
One response stated, “Unfortunately or fortunately the speech is on Tuesday while cpi on Thursday so any hawkishness will be undone post cpi numbers on Thursday!” It further stated that market responses to Powell’s speech may easily be “noise.”
The probability of a 25-basis-point rate increase this month is currently 75%, compared to a 25% probability of a significant 50-basis-point shift, according to CME Group’s FedWatch Tool.
Long-term doubters, like “Big Short” investor Michael Burry, contend that inflation will recur and force the Fed to hike interest rates once more.
“CPI inflation is unlikely to fall as low as 2%, let alone go negative,”gold worm In his last week reply to Burry, Peter Schiff stated:
“But I agree with you that the Fed will return to QE and the official inflation rate will hit a new high. The unofficial actual rate will hit a new all-time record high.”
DCG takes responsibility in the open
This month, institutional investment behemoth Digital Currency Group (DCG) will be put to the test as the FTX saga’s aftereffects continue.
Exposure to FTX increased pressure on some DCG subsidiaries in a scenario that has grown more complicated over time, raising concerns about the survival of the largest institutional Bitcoin investment vehicle.
Over $10 billion in BTC assets are now being managed by the Grayscale Bitcoin Trust (GBTC). Data from Coinglass shows that its share price trades at an indicated 44% discount to the current price of one bitcoin.
As CoinRegency reported, after DCG business Genesis Trading stopped accepting withdrawals due to FTX, exchange Gemini had some of its assets blocked. Cameron Winklevoss, the company’s co-founder, has publicly pleaded with DCG CEO Barry Silbert for clarification.
He gave Silbert until January 8 to fix the issue in an open letter, but Silbert contends that the deadline has passed.
“DCG delivered to Genesis and your advisors a proposal on December 29th and has not received any response,”He made this claim in part in a tweet he sent to Winklevoss on January 2.
Should the situation take an unpredicted turn, the consequences for the Bitcoin market may worsen, with the failure of DCG as an investment vehicle being especially notable.
Checkmate, the main on-chain analyst at Glassnode, described current occurrences by saying that DCG was continuing to“blow up in slow motion.”
“And Bitcoin price is basically a stablecoin,” he added.
“2023 all depends on DCG at this point,”The Invest and Prosper newsletter’s creator, Justin Herberger, predicts
“If they somehow collapse, it’s gonna get ugly. That could be our last leg down to 85% draw down from Bitcoin ATH’s.”
Miners snap a major selling slump
An already precarious situation was made worse by the BTC price decline that followed the FTX implosion. Bitcoin miners have been under observation for the majority of 2022.
In order to be financially viable, miners started to sell off their stored Bitcoin, and on-chain metrics quickly issued a warning that a miner “capitulation” was already happening.
However, neither the size of the sell-off nor its duration proved to be a serious problem, and the situation has lately calmed, as CoinRegency reported.
“The heavy sell pressure from Bitcoin miners that has barraged the market for the last 4 months has finally subsided for now,”This weekend, William Clemente, the creator of the crypto research business Reflexivity, summarised information from the on-chain analytics company Glassnode.
The information displayed the 30-day net position change for Bitcoin miners, which was actually starting to rise compared to the previous month.
The data showed the Bitcoin miners’ 30-day net position change, which was actually beginning to increase relative to the previous month.
The analyst at cryptocurrency research and consultancy business Quantum Economics, Jan Wuestenfeld, was equally optimistic about the current situation when looking at Bitcoin’s hash rate, or the anticipated processing power devoted to mining.
“It is crazy how the hashrate, albeit miners coming under heavy pressure, has only corrected a bit over the last two months of 2022 and now is even increasing considering the 30-day moving average,”he noted.
Last week, the network difficulty of Bitcoin was revised downward by roughly 3.6% to account for a decline in mining activity. However, the most recent prediction from BTC.com states that the upcoming adjustment would eliminate those losses and raise the difficulty level by 9%, setting a new record.
“Extreme fear” meets 18-month lows in cryptocurrency volume
The Crypto Fear & Greed Index indicates that the sentiment in the cryptocurrency market is as ambiguous as ever over the near-term prognosis.
The Index, which creates a sentiment score from a collection of weighted triggers, slipped back into the top of its most pessimistic category, “severe fear,” over the weekend., “extreme fear.”
Despite being a first for 2023, “extreme fear” is not unfamiliar to seasoned market watchers who saw sentiment last year as it spent the longest period of time ever in the lowest zone of the Index.
However, involvement with cryptocurrency seems noticeably limited at the present price levels.
Since mid-2020, the volume of transactions involving cryptocurrencies has been at its lowest, according to research firm Santiment.
“Altcoin volume is particularly low,”An accompanying chart said in a note.
However, involvement with cryptocurrency seems noticeably limited at the present price levels.
Since mid-2020, the volume of transactions involving cryptocurrencies has been at its lowest, according to research firm Santiment.
“Altcoin volume is particularly low,” said a note next to a graphic.
However, separate data from CryptoQuant found that whale selling had also dropped since December, perhaps forming a pattern and having a “positive effect on market sentiment.” This data was reported by well-known social media analyst CryptoBitcoinChris.
