What to expect from Bitcoin this week?

Specialists RBC Crypto analyzed the market situation and assessed the prospects for the movement of the Bitcoin exchange rate over the next seven days.

“Investors have taken a wait-and-see approach”

BitRiver financial analyst Vladislav Antonov

During the period from January 22 to January 28, the price of Bitcoin showed high volatility. During the week, Bitcoin traded in a wide range from $38,555 to $42,246. At the time of writing, the weekly body on the chart is colored green.

On Monday, January 22, the price fell below $40 thousand, reaching $39,480. The drop was caused by an active outflow of funds from Grayscale's Bitcoin ETF amid the approval of competing products.

On Tuesday, January 23, the price dropped to a low of $38,555, which led to a wave of liquidations in the futures market. Grayscale outflows continued to weigh on the stock.

On January 24 and 25, quotes consolidated in the range of $39,484 – $40,555 with multidirectional dynamics. The market remained highly volatile. Market participants were waiting for at least some new portion of positive news.

On Friday, January 26, at the end of the day, the BTC/USD pair increased by 4.66%, to $41,823. Buyers managed to stop the collapse of the crypto market. After a 13-day decline of 21% from the January 11 high of $48,969, the price recovered 9.57% to $42,246. They covered the decline of January 22, and this is a positive factor for the entire market.

Bitcoin's downward correction was largely due to redemptions in the Grayscale Bitcoin Trust (GBTC). Before GBTC converted to an ETF on January 11, it was one of the few ways for US investors to gain exposure to BTC without owning the underlying cryptocurrency. Following the long-awaited approval on January 10, investors took the opportunity to sell their GBTC units, locking in profits on their trades. This meant leaving the cryptocurrency market, hence the downward pressure on the price of Bitcoin. The outflow from the fund amounted to almost $4 billion.

The price bounced off support at $38,555. The recovery accelerated after JPMorgan said the GBTC selling peak had largely ended. The upward correction has intensified since the European session with the dollar index declining. The outflow of funds from the Grayscale trust has slowed, which has led to easing pressure on the cryptocurrency.

BlackRock's iShares Bitcoin ETF (IBIT) has made a significant impact on the cryptocurrency investment industry. In just 10 days after launching the fund, the company has accumulated $1,982,095,794 or 49952.32570 BTC (as reported from BlackRock's website) under management (AUM) after launching the fund and going to market. The amount indicates strong interest among investors. At the current exchange rate, this is already more than $2 billion.

At the time of writing, the BTC/USD pair is trading at $42.3 thousand. Cautious investors have taken a wait-and-see approach, since this is only the first upward wave after the market collapse. Then sellers will once again check buyers to see how ready they are to defend the level of $38,555 and raise the rate to $69 thousand by the halving, which will take place around April 20.

According to BitRiver forecasts, the decline phase will end on February 10th. Then the $50K level can be tested to support the bullish trend from the $24,901 low of September 11, 2023. The higher buyers push the price, the less likely the $38,555 support update will be.

There is great news for buyers – a pin bar is forming on the weekly chart – a green body with a long lower shadow. Let me remind you that with such an inverted candle the fall began from $48,969. And this is an order for growth to $45 thousand.

The economic calendar is quite full of important data. On January 30, Eurozone GDP data for the fourth quarter will be released. On January 31, data on the manufacturing business activity index (PMI) for January in China, reports on oil reserves from the American Petroleum Institute and the US Department of Energy, a meeting of the US Federal Reserve and a press conference by J. Powell will be released. On February 1, the States will publish an index of business activity in the manufacturing sector, on February 2 – a report on the employment market (unemployment, new jobs, average hourly wages), as well as a consumer sentiment index from the University of Michigan for January.

As for the Federal Reserve's next steps, CME Group's FedWatch tool predicts rates will remain unchanged at the Fed meeting next Wednesday (Jan. 31) with a 96.7% probability. Votes were split in March, but the likelihood of a decline in May is estimated at about 87%.

“You shouldn’t expect a quick effect”

Regional Director of the CommEX exchange Anton Toroptsev

Last week, Bitcoin showed multidirectional movement. Having started the week at $41,500, Bitcoin dropped to $38,600, the lowest level since early December. This increased talk about a possible reversal in the cryptocurrency market and the arrival of bearish sentiment. But by the weekend, Bitcoin managed to overcome the resistance and returned to levels above $40 thousand and even tested $42 thousand. However, the coin has not yet managed to stay above this level.

The cryptocurrency market is constrained by the macroeconomic situation in the American economy. Investors fear that against the backdrop of persistent high inflation, still far from the target 2%, the US Federal Reserve Service (FRS) will not decide to cut the key rate at its meeting on March 19-20. This will slow down the flow of capital into risky assets, which include cryptocurrencies.

At the same time, the launch of a Bitcoin ETF on the largest American exchanges supports the Bitcoin rate, preventing it from falling to the values ​​of the fall of 2023 – up to $30 thousand and below. According to the data Bloomberg Terminal, BlackRock's iShares Bitcoin ETF (IBIT) has set a new standard for cryptocurrency investing, raising more than $2 billion under management in just ten days after launch. This growth reflects the strong interest of traditional financial market investors in new digital assets.

BlackRock currently manages almost 50 thousand BTC. The availability of regulated traditional investment vehicles such as ETFs makes it easier for a wider range of investors to access cryptocurrencies. But you shouldn’t expect a quick effect from the launch of ETFs. The main short-term effect associated with rumors of imminent SEC approval has already exhausted itself.

For further growth, the cryptocurrency market needs new drivers. In the medium term, such a factor is expected to be the halving in the Bitcoin network, which will take place in April 2024. The cost of mining will increase significantly, which will support the cryptocurrency rate and in the future 12-18 months after the halving can lead to a significant increase in the price of Bitcoin.

But in the coming weeks, ahead of the March meeting of the US Federal Reserve, the crypto market may show dual dynamics similar to those observed last week. Support levels can be considered the range of $35-37 thousand, in which a wall of buy orders is exposed from investors who want to increase their positions in the cryptocurrency. The resistance level is now in the range of $45-47 thousand.

In the week that starts on January 29, market participants will focus on the US Federal Reserve meeting on January 30-31. Although investors do not expect a rate cut, they are interested in the statements that will be made following the meeting. These signals, in which investors expect to hear hints about the pace of key rate cuts in 2024, will affect the situation in the markets and could provoke increased volatility in the lead-up to and immediately after the meeting.