Since January’s low point of $32,933.33, Bitcoin has steadily risen. Bitcoin has seen a 28% increase in its value. However, after forming a ‘double top’ formation near the swing highs of $45,500, the price fell. Bitcoin starts the week in a slow decline toward pivotal support of $40,000 where it has been for some while.
After a week of joy for bulls, BTC now faces jittery stock market, rising US dollars and other realities.
The bullish Bitcoin narrative was put to the test this week as geopolitical tensions between Ukraine and Russia, as well as the likelihood of a 50 basis point Federal Reserve interest rate hike in March, weighed on the world’s largest cryptocurrency. Bitcoin fundamentals indicate that BTC has a positive momentum. These are some things to keep in mind.
Bitcoin Price Exceeds Futures
During the rise to and fall of local highs, there has been some interesting activity in Bitcoin derivatives markets.
Open interest leverage has been evaporating from futures markets, as reported by Twitter observers including Glassnode chief analyst Checkmate, and with it the possibility of being deleveraged or “liquidated.”
Checkmate sent a tweet Sunday along with a chart that showed the de-risking.
“Bitcoin futures leverage has fallen significantly this week, falling from 2.0% of Market cap, to 1.75%. This was not the liquidation cavalcade that we know. This was due to traders closing their positions. I expect spot to lead now.”
Bitcoin futures open-interest leverage ratio vs. Bitcoin/USD annotated diagram. Glassnode
Byzantine general, a colleague commentator, suggested that futures might now trade below the spot price, instead of above.
He added in his own article tonight that the difference between the futures basis and spot is already “pretty significant,”
CME futures traded around $200 lower than spot prices at $42,000 as of the publication.
Testing of 50-day moving mean support
Following a ten-day comeback, Bitcoin is again confronting resistance levels that have been off the bulls’ radar since the middle of January.
The weekend ended relatively calm after passing $45,500 last week, despite several lower lows in the daily chart.
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With that, however, comes the chance of short-term upside to close the CME futures “gap” which is now near $42,400 above spot pricing.
BTC/USD Trades on $42k TradingView
“Bitcoin is still just sitting in between support and resistance,” noted popular commentator Matthew Hyland on Monday, adding that he was “relaxing” in the face of recent price movements.
In the meantime, trader and analyst Rekt Capital highlighted BTC’s relative weakness when it comes to reclaiming support levels on a macro scale, despite the fact that support and resistance levels are near by.
His previous identification of two moving averages as support was necessary in order to help Bitcoin regain its November high.
Hashrate Soared
So far, Bitcoin’s network fundamentals have had a successful year, and this week is no different.
The weekend saw new records in hash rate charts which are a gauge of how much processing power is allocated to mining.
While it’s hard to know the precise amount of hashing power on the Bitcoin network, hash rate estimates have been on the rise since the middle of last year, and the ecosystem only required a few months to fully recover from the impact of China’s forced miner relocation.
Bitcoin difficulty chart. Source: Blockchain
The United States is leading in mining now that it appears there are other participants in the race for the top.
Bitcoin’s mining difficulty, which has also recovered fully after plummeting to accommodate for less hashing activity post-China, is more clearly observable.
The difficulty level was 26.69 trillion as of Monday, but the next automated adjustment will push it even higher – to over 27 trillion for the first time.
This modification takes effect in 3 days. It will lead to a 2.2% increase in your price.
After a two week hiatus BTC/USD has returned to $40,000, which indicates that investors who are looking to take a position in the second half of January found it particularly attractive.
BTC/USD has since dipped back into the zone that must be breached by high volumes to build a new directional base on the daily chart, after rebounding above $45,500 from January’s lows. Bitcoin has reached a relative equilibrium with support and resistance zones visible above and below.
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Featured Image from Unsplash. Charts by TradingView.com