Bitcoin Weekly Overview: BTC Support Sitting at $33,000, Fundamentals at Play

2022/01/31 11:05:36

Cryptocurrency trading was light over the weekend, and it is likely to remain so in Asian markets as many traders enjoy the Lunar New Year vacation week. The lunar New Year, commonly known as Chinese New Year or the Spring Festival, is the Chinese calendar's traditional lunisolar calendar's new year.

Many Asian countries observe it, and the festivities usually extend for several weeks. The major stock exchanges in China, Hong Kong, South Korea, and Singapore are closed for the Lunar New Year holiday, as most traders travel to family reunions.

While the crypto market is open 24 hours a day, trading activity in Asia may be diminished next week due to the holidays. Consequently, Bitcoin didn't move much over the weekend amid a lack of Bitcoin news and minimal trading.

Bitcoin Price Update

The leading cryptocurrency by market cap, Bitcoin, is trading at $37,100. The BTC/USDT coin has recovered 4.81% after testing a low of $32,950. Ether’s, the second-largest cryptocurrency by market value, was consolidating a narrow trading range as it continues to trade above the $2,500 level.

Bitcoin’s market capitalization rose 4.39% week-over-week to $701 billion, while the trading volume skyrocketed to $16 billion over the same period. Over the weekend, the volume of Bitcoin traded on major crypto exchanges dropped significantly compared to the last week.

Let's start with the market fundamentals, and then move on to technical analysis.

Goldman Sachs: BTC is Increasingly Vulnerable to Fed Rate Hikes

International investment bank Goldman Sachs has cautioned that as Bitcoin gains traction, it will become increasingly sensitive to Federal Reserve rate hikes.

Goldman’s co-head of foreign exchange Zach Pandl, as well as FX analyst Isabella Rosenberg, noted that as widespread acceptance of Bitcoin grows, the cryptocurrency's exposure to Fed policy increases as well. They stated:

"As Bitcoin's popular usage has increased during the previous two years, its correlation with macro assets has increased."

The markets now anticipate that the Federal Reserve will raise interest rates five times this year. According to Goldman Sachs, the Fed could hike interest rates at each meeting this year. However, last week, the Federal Open Market Committee's (FOMC) post-meeting statement did not specify a precise date for the increase, though signs are that it might occur as soon as the March meeting.

Additionally, Goldman's analysts stated:

Over time, the continued development of blockchain technology, including applications in the metaverse, may act as a secular tailwind for certain digital assets' valuations. Goldman Sachs recently stated that the metaverse could represent an $8 trillion opportunity. A rival investment firm, Morgan Stanley, has anticipated a comparable scale for the metaverse.

Goldman Sachs projected earlier this month that Bitcoin might hit $100,000 as the cryptocurrency continues to eat into gold's market share. Meanwhile, UBS, Switzerland's largest bank, has warned of a crypto winter in the face of expected Fed rate hikes and increased regulation.

Bitcoin is currently trading at $37,102, up 6.6% week-over-week and down 20.5% month-over-month, but still up 9.8% year to date. The news from Goldman Sachs is making Bitcoin's fundamental analysis bearish.

Ark Invest: Bitcoin to Exceed $1 Million by 2030

Ark Invest's analyst Yassine Elmandjra noted in the firm's "Big Ideas 2022" report issued last week that "while Bitcoin's market capitalization reached an all-time high in 2021, Ark's analysis suggested that its network fundamentals remained healthy." Therefore, the price of a single bitcoin will approach $1 million by 2030.

El Salvador legalized Bitcoin alongside the US dollar in September of last year. President Nayib Bukele of El Salvador has projected that Bitcoin will become legal tender in two additional countries this year. Meanwhile, Fidelity Investments (A financial services company) stated that it "would not be surprised if additional sovereign nation-states purchase some bitcoins in 2022, and possibly even a central bank."

Thus, Bitcoin's long-term price forecasts remain optimistic, which underpins the BTC/USD prices in the short run.

A Glimmer of Hope for Crypto from President Vladimir Putin

When Russia's Central Bank recommended a ban on cryptocurrency investment and mining last week, it appeared to be the end of the road for the crypto industry's future in the country. The Central Bank of Russia (CBR) proposed new restrictions on the use of cryptocurrency within Russia. According to the central bank, that would limit the financial system's exposure to risks associated with the emerging sector, but they may slow the diffusion of technologies to improve productivity.

The proposals suggest prohibiting cryptocurrency trading for fiat money in Russia and prohibiting cryptocurrency activities from using Russia's financial infrastructure. It would be illegal to organize the issue (including mining), circulation, or exchange of cryptocurrencies, and banks would be prohibited from investing in cryptocurrencies.

But now, a ray of hope has appeared for this country’s crypto supporters, whose transactions with decentralized cryptocurrencies amount to an unprecedented $5 billion each year (according to Central Bank estimations).

A few days ago, Russia's President Vladimir Putin spoke during a video conference with government ministers, which included a discussion of the crypto economy.

Vladimir Putin’s Stance on the Bitcoin Ban

"The central bank has its own perspective," remarked Russia's President Vladimir Putin. It is related to the fact that the expansion of this type of activity poses certain risks, first and foremost for the country's residents, given the significant volatility and other aspects of this topic. This should be balanced against Russia's "certain competitive advantages" in mining, owing to the country's surplus of electricity and well-trained personnel.

In addition, President Putin has solicited that the country's central bank meets with his government in the near future to reach an agreement on the use of cryptocurrency. Even the country's Finance Ministry has spoken out against the Central Bank's proposal to ban cryptocurrency, claiming that it will stifle technological growth in the business.

This statement appears to provide much-needed hope for the future of Russia's crypto industry. Hence, it provides much-needed support to the BTC/USD pair and keeps it above the $33,000 demand zone.

Bitcoin Price Chart on the Daily Timeframe | Source: BTC/USDT

Bitcoin Technical Analysis: Why $38,945 is Crucial for BTC?

Although the price of Bitcoin has recovered during the previous week, the overall sentiment remains bearish. BTC/USDT price has moved to $37,100, facing strong resistance at $38,900; a downward channel is extending that. Besides, this level is working as a supply zone, and BTC has tested it twice, making it a double top pattern.

On the daily chart, closing daily candles under the $38,900 level, especially the "tweezers top" pattern, signals chances of downtrend continuation. Bitcoin's immediate support stays at $35,750, and a breakout exposes the coin towards the $33,110 level. In addition, a dip in demand could open additional room for selling until the support level of $29,430.

The leading technical indicators, such as RSI (Relative Strength Index) and MACD, are divergent. The RSI is holding under 50, generally, it supports a downtrend, while the MACD (Moving Average Convergence Divergence) has started forming histograms above 0, indicating chances towards an upswing. Since Bitcoin’s price is currently holding below 50-days exponential moving average, the prospects of a bearish trend remain stronger. Alongside, the long-term moving averages such as the 100 and 200 period MAs are also supporting the downside.

Alternatively, a surge in Bitcoin's demand can slice through $38,945 resistance until the resistance levels of $41,300 or $44,720. Investors will focus on the financial news to capture price action.

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