Macro clouds gather on the horizon as Bitcoin continues with a bearish trend.
Although it was a promising weekend for BTC/USD, the pair still managed to attract warnings over fallacious price moves during “out of hours” market times. These moves couldn’t have come at a more opportune time as the weekly close dropped the pair down over $1000.
Even at a close of $37,900, it was still not enough to appease analysts’ demands. The all too familiar Bitcoin thus continues with its volatility. The question on everyone’s mind is when will the crypto stabilize?
Another area of interest for analysts is the Federal Reserve as correlations between inflation, interest rate hikes, asset purchasing, and Cryptocurrencies continue to be seen.
Let’s take a look at four things worth considering when trying to predict Bitcoin’s next moves:
A Bearish Outlook For The Weekly Close of BTC
Even the meagre price gains into the weekly close gave Bitcoin Bulls a temporary reason to rejoice this Sunday. A rejection candle swept into play at midnight UTC, sending BTC/USD tumbling below $36,000.
Following a disappointing performance, Bitcoin is therefore back in the same old range, which some believe may lead to a retest of lower levels.
By raising funding rates on derivatives, the rally to highs around $38,600 overturned previous negative sentiment as expectations quickly shifted from expecting further downside to anticipating further bullish moves. After the reversal, however, funding rates began to slide, with most hovering just below neutral as of this writing.
Could S&P 500 Reverse The Worst Month Since March 2020?
Although Bitcoin’s monthly close looks to have no surprises in store, stock markets may provide some relief.
Pre-session Monday, the S&P 500, with which Bitcoin has shown increasing positive connection in recent months, is projected to have its worst monthly performance since March 2020. As Fed policy bites into the enthusiasm that accompanied unprecedented liquidity provision at the start of the Coronavirus pandemic, the S&P is down 7% this month, imitating the jittery start to the year for Bitcoin.
While the Fed is currently quiet about the timetable for rate hikes that will follow the shutoff of the “easy money” spigot near home, there is another potential problem looming for Bitcoiners.
The Biden administration is moving forward with the crypto executive order in February, which could further erode the already battered sentiment. The threat of the Infrastructure Bill remains for many of the market participants, and further disadvantageous treatment of the crypto phenomenon would be horrifying from a country that holds most of the Bitcoin mining hash rate.
“Multiple meetings” with officials have already taken place, with the aim of unifying government approaches to crypto regulation.
Experienced Hands Age Gracefully
According to data released this week by on-chain analytics company Glassnode, coins that last moved between five and seven years ago are moving at an all-time high. The cohort has now reached 716,727 Bitcoin.
Furthermore, Bitcoin exchange reserves decreased in January despite price losses. This week, major exchanges lost more than $243 million alone, according to Glassnode data. According to CryptoQuant, a company that tracks 21 major trading platforms, balances are at a low point for the first time since 2018.
Record-breaking 30% Discount for GBTC
It’s not looking good for the Grayscale Bitcoin Trust (GBTC). The industry’s flagship BTC investment product continues to suffer from waning demand despite institutional interest returning in January. In last week’s trading, GBTC traded at its biggest ever discount to Bitcoin spot price, according to on-chain analytics firm Coinglass.
Investors used to pay this premium for access to these BTC holdings – the fund’s discount to net asset value (NAV) – but now the tables have completely turned. New entrants were able to purchase GBTC shares almost 30% below the spot price on Jan. 22.
GBTC experienced a fast change of environment due to the implementation of exchange-traded funds (ETFs) combined with price actions. With the U.S. regulator’s approval, the GBTC is due to become a spot-based ETF.