Bitcoin (BTC) begins the week with a slow decline against the major support at $40,000.
After the Bulls had a lot to celebrate last week, the current situation looks like a new dose of reality as BTC struggles with jittery stock markets, a bullish US dollar and more.
The picture is, as always, mixed – while the spot price may not look impressive, Bitcoin is stronger than ever, with network members doubling their long-term commitments.
Add to that a slow decline in risk-taking behavior in the derivatives markets and the basis for some sustainable price growth could be laid. Will it happen this week?
Cointelegraph presents five factors to consider in the coming days for BTC/USD.
Bitcoin is testing new support for the 50-day moving average
After 10 days of optimization, Bitcoin is now calculating resistance levels that have been missing from the bullish radar since mid-January.
After breaching the $45,500 level late last week, the weekend conditions were relatively calm with the daily chart still seeing a series of lower bottoms.
Sunday’s weekly close, when price action remained roughly the same until the end of last week, was quite disappointing – BTC/USD set a lower close at just under $42,000.
Alongside this, however, there is a chance for a short-term rally to fill the “gap” in CME futures, which are now above the spot price near $42,400.
“Bitcoin remains between support and resistance,” famous commentator Matthew Hyland summed up on Monday, adding that it has “relaxed” in the face of current price action.
Meanwhile, with the support and resistance levels closed, the trader and analyst at Rekt Capital confirmed the relative weakness of BTC in recovering support levels at the macro level.
He previously identified two moving averages that should be confirmed as support for bitcoin to reach its highest level since November.
Closer to home, the 50-day moving average is being called into question as a new week begins after the week of the above action, according to data from Cointelegraph Markets Pro and TradingView.
Light BTC/USD (bit tick) 1 day chart with 50 day moving average. Source: Trading View
DXY spoils the mood for risky assets
A rally in the US dollar on the Bitcoin pivot to $40,000 may not help.
Since February 4, the US Dollar Index (DXY) has risen, reversing the sharp downtrend identified a week ago.
This has traditionally caused problems for risky assets, and DXY has traded above 96 again since Monday.
US Dollar Currency Index (DXY) on a 1-day chart. Source: Trading View
For stocks no longer supported by a potential US Federal Reserve rate hike in March, the geopolitical situation around Ukraine and Russia is a nerve factor this week.
“In the last century, there have only been four years in which both stocks and bonds have had a negative year,” says analyst Lynn Alden.
“Obviously too early, but so far both stocks and bonds have delivered negative returns in 2022.”
Meanwhile, oil continued its way to the $100 mark in the same tension, with Brent crude futures breaking the $96 barrier on Monday.
As Cointelegraph mentioned, both oil and bitcoin are still big options this year.
Spot price begins to outperform futures contracts
Amid the ups and downs of the local highs, there has been some interesting activity in the bitcoin derivatives markets.
As Twitter watchers, including chief analyst Glassnode Checkmate, point out, the impact of open interest rates on futures markets is waning, and with it the risk of being foreclosed on or “liquidated.”
However, the drop this time is not due to a drastic change in price that knocks out positions. Instead, investors prefer to change their strategy.
“Bitcoin forward lending has fallen significantly this week, dropping from 2.0% market capitalization to 1.75%,” Checkmate wrote on Sunday, along with a chart showing the decline in risk.
“But this wasn’t the elimination streak we all know and love. This is one of the traders choosing to close their positions better. I expect it to lead the way now.”
Bitcoin futures interest rate leverage ratio compared to BTC/USD chart annotated. Source: Checkmate / Twitter
Regarding the relationship between spot prices and futures contracts, the Byzantine general commentator added that futures contracts could now start trading at a lower price instead of the spot price.
In his report, he added that the discrepancy between the futures contract and the spot contract was “extremely significant”.