Feb 21, 2023

BTC/USD Back Below $25K as Bulls Lack Momentum

Bitcoin (BTC) ended the last week of February in a volatile mood as a crucial area of resistance failed to break. After a classic “fakeout” during low-volume weekend trading, BTC/USD is back below $25,000, with bulls still lacking momentum.

The largest cryptocurrency saw what looked like the next stage of its 2023 recovery last week, making swift gains and even tapping new six-month highs. However, February’s progress has been much slower and hard won than January’s 40% gains. How will the rest of the month pan out?

This week brings a critical monthly close, along with a potential external price trigger in the form of minutes from the United States Federal Reserve. Meanwhile, Bitcoin network fundamentals are due to leap to yet another all-time high, with miners in full recovery mode.

RSI “bearish divergence” causes alarm

After a mostly calm start to the weekend after days of macroeconomic data reactions, Bitcoin woke up late Sunday to rise back above $25,000. However, this was not to last, and as Cointelegraph reported, signs on exchange order books pointed to manipulative moves by large-volume traders.

A subsequent comedown after the weekly close took BTC/USD below $24,000 before a bounce back to the same levels as Saturday, where the pair still traded at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.

For traders, there was natural cause to be wary. “Not paying much attention to weekend PA.. BTC typically saves its meaningful moves for US stock market hours,” Crypto Chase wrote in part of a Twitter summary.

Monitoring resource Material Indicators initially flagged the order book activity, queried how long the phenomenon might continue with bulls powerless to make inroads higher.

An additional chart of the Binance order book confirmed that major bid support, known as a “bid wall,” had moved lower to $23,460, giving the spot price room to drift lower.

Fellow trader and analyst Matthew Hyland admitted that it was “really hard to tell” whether Bitcoin could break higher on short timeframes. Holding the area around $22,800 in the event of a pullback, followed by the key breakout, however, “wouldn’t surprise me,” he said on the day.

More concerned about the rally’s strength was Venturefounder, a contributor to on-chain analytics platform CryptoQuant. In a Twitter thread, he warned that external factors such as “macro weakness” could have an immediate bearish impact on crypto markets.

“Bitcoin bearish RSI divergence continues… Almost the exact opposite way of the May–July 2021 period. I think any macro weakness can have BTC snap back to $19-20k real quick,” part of the comments stated.

Venturefounder referenced the Relative Strength Index (RSI) metric, which measures how overbought or oversold an asset is at a given price point. In 2021, RSI was increasing versus a BTC price correction, subsequently ending in current all-time highs of $69,000 in November that year.

All eyes on FOMC minutes and U.S. dollar

The upcoming week holds fewer potential macro triggers than the last, with a sprinkling of U.S. data releases, including personal spending in the form of the Personal Consumption Expenditures Index (PCE).

However, the event on most crypto pundits’ radar is the release of the minutes from February’s Federal Open Market Committee (FOMC) meeting at the Fed. This was where the latest benchmark interest rate hike was decided, with expectations that Fed Chair Jerome Powell included talk of a moratorium on rate hike policy, if only theoretically.

“We also have FOMC minutes releasing on Wednesday where Powell will describe what a rate hike ‘pause’ could look like,” Crypto Chase mentioned about the event.

Any return of inflationary tendencies would boost U.S. dollar strength, which spent the last macro trading day of the previous week erasing prior gains. Matthew Dixon, founder and CEO of crypto rating platform Evai, spelled out the bearish scenario for the U.S. Dollar Index (DXY) in what would be a bullish tailwind for risk assets, including crypto.

Hash rate, difficulty in line for fresh record highs

In a familiar silver lining, Bitcoin’s network fundamentals are keeping the bullish vibe firmly intact as the month draws to a close. The next automated readjustment will see difficulty adding an estimated 10% to its current tally. This will cancel out the previous readjustment’s modest decline to send difficulty to new all-time highs.

This is a crucial yardstick for gauging Bitcoin miner sentiment, as such significant increases suggest corresponding advances in competition for block subsidies. It comes on the back of increasing coverage of so-called “ordinals” fees, with miner profitability clearly recovering after months of pressure.

Data from on-chain analytics firm Glassnode bears this out. Miners have begun retaining more BTC than they sell on rolling monthly timeframes, reversing a trend of net sales in place from mid-January.

Raw data from MiningPoolStats meanwhile shows Bitcoin network hash rate also preserving its upward trend, remaining at over 300 exahashes per second (EH/s).

Longtime Bitcoin market participants will recall the once popular phrase, “price follows hash rate,” which postulates that a large enough hash rate uptrend has inevitable bullish implications for BTC price action.

Most “greed” since Bitcoin all-time highs

$25,000 is a headache for reasons beyond solid resistance — breaking above it could be an unsustainable move for Bitcoin. The latest findings from research firm Santiment suggest that crypto market sentiment becomes too greedy around those multimonth highs.

The ever-popular Crypto Fear & Greed Index meanwhile shows “greed” as the overriding sentiment flavor across crypto this week. The push to the highs for Bitcoin coincided with a reading of 62/100 for the

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