BTC ‘likely’ to repeat Q4 2020 move — 5 things to watch in Bitcoin this week

bitcoin (BTC) starts a new week facing multiple hurdles but strong inside support – can the old resistance finally drop below $50,000?

A correction event now almost in its third month is frustrating many, but conditions may soon be right for a fresh charge against opportunistic bears, a growing number of analysts say.

With inflation on the rise and US lawmakers poised to take the Bitcoin mining debate public this week, there are plenty of potential pitfalls in store.

Nonetheless, it is beginning to look like Bitcoin is at the point where it is capable of producing a classic surprise when most of mainstream economics least expects it.

Cointelegraph looks at five factors worth paying attention to when charting BTC price action over the coming week.

Bitcoin Retains Key Weekly Closing Level

Bitcoin seems decidedly uninterested in tackling even local resistance levels as the week begins.

After a range-bound weekend with little single price action, BTC/USD is hitting lower lows on short timeframes while avoiding key zones around $44,000.

With Wall Street closed for a holiday, Monday could be ready to offer more of the same before the markets give direction.

However, Bitcoin managed to close out the week at exactly the crucial point identified by trader and analyst Rekt Capital as helpful in aiding bullish momentum.

“A weekly close above ~$43100 (black) would be a good confirmation sign for BTC to continue higher from here,” he said. wrote on Sunday along with an accompanying price chart.

“By turning black into support on the Weekly, $BTC would confirm a re-entry into its ~$43100-$51800 range.”

A subsequent drop took the largest cryptocurrency lower, with $42,337 on Bitstamp, the local floor for Monday at the time of writing.

Also cautiously bullish is popular trader Crypto Ed, who is eyeing a possible repeat of last week's run above $44,000, something that will subsequently be reversed.

"Although it's early, this seems to be the beginning of the continuation of last week's movement. Fingers crossed!" summarized part of his last twitter update.

Last week, meanwhile, Cointelegraph reported on sentiment favoring a breakout to the upside as an eventual result of current range-bound behavior.

Congress to Discuss “Cleaning Up” Crypto Mining

The "stage is being set" in more ways than one this week, as the inflation issue returns to haunt both markets and US politics.

Amid a new flurry of headlines about how inflation is hurting consumers, the higher The 40-year Consumer Price Index (CPI) print is already catching up with President Joe Biden's approval ratings.

Controlling 7% YoY CPI Rise Could See Fed Enact No Fewer Four Key Rate Hikes in 2022 Alone, Goldman Sachs forecast In the past week. This, in turn, puts more pressure on tired consumers.

“The stage is being set in the next few weeks”, Pentoshi argument.

Closer to home, this week US lawmakers will discuss the alleged environmental impact of cryptocurrency mining.

With a significant chunk from the Bitcoin hash rate now coming from the US, any hostile politics will matter more than most when it comes to sentiment. No one will welcome a repeat of the exodus from China starting in May 2021, and its collateral effect on hash rate and network security.

Hash rate, like Cointelegraph indicated, is now back at all-time highs, fully recovered from last year's events.

The Subcommittee on Oversight and Investigations audience will take place on Thursday and is titled “Cryptocurrency Cleanup: The Energetic Impacts of Blockchains.”

The hearing will be broadcast live in real time that day.

Bitcoin “a bonfire covered in gasoline”

Bitcoin's volatility is hitting multi-year lows, encouraging its acceptance as a mainstream asset, but not something many expect to last.

According to the Bitcoin volatility index, which calculates the standard deviation of daily BTC returns over the past 30 and 60 days, Bitcoin is at its least volatile level since November 2020 at 2.63%.

Current price movements are therefore similar to before BTC/USD entered price discovery after breaking its all-time high of $20,000 from 2017.

For trader, entrepreneur and investor Bob Loukas, the stage is now set for a possible repeat of those events.

“Remember when everyone was loading BTC options in September/October for the super cycle. Those are probably down more than 80%,” he said. commented, noting that derivatives traders ahead of the current all-time highs of $69,000 are likely to be more than disappointed.

“The drop in volume speaks to a period of consolidation, likely a period of similar outcome leading up to the Oct 20 move. But think there is still time to grind in this BTC range."

While “exciting” price moves have yet to reappear after the December crash, however, they are now more likely thanks to the increasingly inaccessible supply of Bitcoin.

“With an illiquid supply at ATH for this cycle, Bitcoin is essentially a gasoline-covered bonfire,” market commentator Johal Miles argued.

"The slightest breath of demand will bring roaring flames."

Like Cointelegraph reported, BTC is being taken into cold storage out of reach of speculators.

Interest "quiet since" early 2021

Amid questions about the absence of retail investors even after a 40% price drop, new data shows that the sector has in fact had little interest in Bitcoin for a whole year.

Looking at new entities appearing on the blockchain, Glassnode analyst TXMC Trades submitted how quiet Bitcoin really has been in terms of retail adoption since January 2021.

A look at the 30-day exponential moving average (EMA) of new entities joining the chain reveals that the last major rise ended early in the first quarter of last year.

Since then, despite two new all-time high prices, new entity numbers have fallen and returned to the standard rates normally seen after bull cycle peaks.

“Bitcoin bull/bear markets have a distinct on-chain activity profile,” TXMC explained on Twitter.

"... Activity-wise, the last bullfight ended in January 2021. It's been quiet ever since."

The data underscores how the average investor has all but forgotten about Bitcoin, even as it hit new highs and institutional activity remained strong.

Interest levels from Google users add to the trend, with search fees for "Bitcoin" worldwide at levels that were previously the norm in December 2020.

Miners, while far from underwater at current price levels, are also making less revenue from transaction fees than at any time since the end of 2020: just 1.08%.

"This is an indicator that retail is not yet... Although the price is really similar to the beginning of 2021, when will retail be?" On-chain analyst based on Twitter Blockwise consulted this weekend, featuring more data from Glassnode.

To be afraid, to be "extremely" afraid

The new year of Bitcoin "extreme fear" keep going – and if on-chain behavior is anything to go by, it's set to remain the dominant sentiment force.

Related: Top 5 Cryptocurrencies to Watch This Week: BTC, NEAR, ATOM, FTM, FTT

According to the Fear and Greed Crypto Index, which measures market sentiment across a basket of factors to assess how traders are likely to act at a given price point, things have rarely looked bleaker.

Since the end of December, the Index has characterized the status quo as "extreme fear" and, so far, no price changes have managed to alter it.

The same is true this week, with Fear & Greed at 21/100, well into the "extreme fear" bracket.

Similarly, data covering BTC movement in profit or loss shows timidity among trading brokers, with very little speculation in sight.

Such behavior is common during price declines and was seen last year during the summer when BTC/USD fell and bottomed out around $30,000.

“This is the true index of fear and greed”, popular Twitter account On-Chain College commented, loading the data, which comes from Glassnode's realized profit/loss ratio indicator.