In what may bring vindication to those anticipating a major BTC price drop, BTC/USD returned below $23,000 and made lower levels on the hourly timeframes.
The trade on February 6 may not be underway in Europe or the US, but Asian markets are already falling and the US dollar is gaining – other potential hurdles for Bitcoin bulls to overcome.
With some macroeconomic data released from the Federal Reserve this week, attention is mainly focused on next week’s inflation check in the form of January’s Consumer Price Index (CPI).
In the run-up to this event, the outcome of which is already hotly contested, volatility may gain a new foothold across risky assets.
Add to those aforementioned concerns that bitcoin is long overdue in a more significant rebound than the one seen in recent weeks, and the recipe is in for challenging but profitable trading conditions.
Cointelegraph looks at the state of play for Bitcoin this week and takes into account the factors influencing the movement of the markets.
BTC price disappoints with a weekly close
It is a tale of two bitcoins when it comes to analyzing bitcoin price action this week.
The BTC/USD pair has managed to hold most of its impressive gains for the month of January, which are almost 40%. At the same time, signs of collapse appear on the cards.
While it is relatively strong at just below $23,000, the weekly close still fails to overcome the previous close and represents rejection at a key resistance level from mid-2022.
Popular trader and analyst Rekt Capital summed up on the matter on Feb. 5: “BTC has failed to retest ~$23,400 at the moment.”
The accompanying weekly chart highlighted support and resistance areas in action.
“BTC could close weekly above this level for a chance to the upside. August 2022 shows that a failed retest could send BTC deeper into the blue and blue range.”
“Technically, the re-testing process is still ongoing.”
Annotated BTC/USD chart. Source: Rekt Capital / Twitter
As Cointelegraph reported over the weekend, traders are already betting on where a potential pullback might end up — and levels that could act as definitive support to fuel Bitcoin’s fresh bullish momentum.
These are currently centered around $20,000, which is a psychologically significant number and Bitcoin’s legacy all-time high since 2017.
The BTC/USD pair is trading at around $22,700 at the time of writing, according to data from Cointelegraph Markets Pro and TradingView, continuing higher during Asian trading hours.
“Some of the bids in this last batch (green box) have been filled but most of the remaining bids below (red box) have been withdrawn,” trader Credible Crypto wrote about order book activity on February 5.
“If we continue lower here, eyes are still on the 19-21k area as a logical retracement area.”
For the quietly confident Il Capo of Crypto, the time has indeed come when it comes to a trend reversal. Supportive of the fresh macro lows during the January gains, the trader and analyst argued on social media that a break below $22,500 would be a “bearish confirmation”.
“The current bear market rally has created the perfect environment for people to continue buying all dips when the current trend reverses,” he wrote during a Twitter debate.
“The perfect scenario for a surrender event in the next few weeks.”
BTC/USD 1-day candlestick chart (Bitstamp). Source: TradingView
Fed officials speak as the market looks forward to the CPI
The week in macroeconomics looks decidedly quiet compared to the beginning of February, with less data and more commentary to set the mood.
That comment would be courtesy of Federal Reserve officials, including Chairman Jerome Powell, with any hint of a policy change in their language potentially turning to markets.
The previous week had seen such a phenomenon occur, with Powell using the word “de-inflation” no fewer than fifteen times during a speech and Q&A accompanying the Fed’s move to enact a 0.25% interest rate hike.
Ahead of new key data next week, the talk is raging in analytics circles about how and when the Fed might shift from restrictive to accommodative economic policy.
As Cointelegraph reported, not everyone thinks the US will fall back on a “soft landing” when it comes to bringing down inflation and will instead face a recession.
Investor Andy West, founding partner of Longlead Capital Partners and HedgeQuarters concluded in a dedicated report: Twitter thread for the weekend.
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Meanwhile, further analysis argues it could be business as usual, with smaller rate hikes after Powell’s “small victory lap” on declining inflation.
“Personally, I think the Fed will probably hike +0.25% in the next two meetings (March and May),” Caleb Franzen, chief market analyst at CubicAnalytics, wrote in a blog post on Feb. 4.
