Bitcoin (BTC) is starting the last week of January in a place no one wanted but warned about – a 50% drop from all-time highs.
The trip to $34,000 means that BTC/USD has now halved in just two months, and perhaps it is only natural that there are fears of continued losses.
With $30K left unchallenged, Bitcoin remains slightly above the bottom of the $58,000-$29K drop last summer.
As the macro markets themselves are having a hard time due to the rapid changes in the US Federal Reserve’s policy, cryptocurrencies will follow the ratio of coins to traditional assets in the future. Can Bitcoin break this trend?
So far, there are some signs of a big uptick in cards, but under the headlines, it’s not all as it seems when it comes to bitcoin’s strength.
Cointelegraph provides an overview of five areas to consider this week when looking at what could be next in BTC pricing.
Bitcoin nearing ‘generational bottom’
Bitcoin bears were ignored after hours of trading on Wall Street as the weekend saw another round of losses.
From $39,000 to the current low of $34,000, BTC showed no mercy as liquidations increased and sentiment fell once again.
Now, of course, traders are looking at the $30,000 test as a more accurate representation of how Bitcoin will perform in the short to medium term.
Other estimates of where some of the relief might have occurred in the past were $33,000 and $31,500, yet to be reached.
Dylan Leclerc, Senior Analyst at UTXO Management, analyzes various aspects of the blockchain situation, highlighting the current fundamental value of bitcoin as a potential key to what he calls the “bottom of generation.”
The base value indicates the total price at which Bitcoin was sold from different groups of investors. The calculation, along with other data, can give an idea of where Bitcoin’s bearish phase is likely to end.
The network’s base cost is currently $24,000. The ratio between the underlying value and price, known as market value to realized value (MVRV), may also drop further before it enters its own traditional ground signal.
The familiar target of BTC/USD looks closer to home in the form of a CME futures gap.
While a week of just over $36,000 on Friday left Bitcoin unable to reclaim levels near $40,000 as part of a “gap bridging”, the lowest gap since July is still around $32,000.
“Actual price action will occur at the start of the new week when futures contracts open and trading begins on the Chicago Mercantile Exchange,” Cointelegraph contributor Michael van de Poppe predicted.
One-day chart of CME Bitcoin futures. Source: Trading View
Futures gaps are blank spaces on the CME Group futures chart between the end of trading on Friday and the beginning of the following Monday. If the spot price moves in the meantime, it tends to bounce back to “fill” the gap, often within days or even hours.
Highlight the RSI
This weekend, Cointelegraph reported that Bitcoin’s daily Relative Strength Index (RSI) is near its lowest level since the coronavirus crash in March 2020.
The RSI is well below its classic “oversold” area and has become one of the most compelling signals for analysts concerned about believing in a bear market.
Not only the daily RSI but also the weekly RSI is de facto back where it fell nearly two years ago. Those who followed then took home big bucks as the following year saw an almost runaway rise in the price of bitcoin.
The RSI indicates how overbought or oversold an asset is at a given price point, so current lower measurements lend weight to the idea that $35,000 does not accurately reflect the value of bitcoin.
For the popular Twitter trader and analyst TechDev, the numbers are climbing and the RSI on the weekly chart is within the classic pivot areas from the previous Bitcoin history.
“Monthly RSIs are approaching levels that have historically been the best buying opportunity ever,” added analyst Matthew Hyland, along with a separate chart.
Bitcoin RSI vs BTC/USD monthly chart with comments. Source: Matthew Hyland / Twitter
On both the higher and lower time frames, the Bitcoin RSI is indicating that the current price levels are unstable.
Miners are clinging…for now
Another phenomenon that could subtly identify $35,000 in bitcoin as a red herring is miners’ sales — or the lack thereof.