‘Most bullish macro backdrop in 75 years’ — 5 things to watch in Bitcoin this week

Bitcoin (BTC), which begins a new week, is in a strange location — one that is very similar to last year.

BTC/USD has now reached $42,000 after what different sources describe as twelve months of consolidation — nearly the same level it was in week 2 of January 2021.

While there have been some significant ups and downs, Bitcoin is still in a familiar range.

Depending on your perspective, the outlook can vary. Some believe new all-time highs could be achieved this year. Others call for more consolidation months.

Cointelegraph looks at the possible changes in crypto sentiment in the near future, despite it being at its lowest level in history.

What will $40,700 mean?

Bitcoin had a difficult weekend, as the latest in a string of sudden downward moves saw $40,000 support inch closer.

TradingView and Cointelegraph Markets Pro data showed that BTC/USD hit $40,700 on major exchanges prior to bouncing. A correction has since taken place.

Ironically, it was this very level that was in focus on that exact day in 2021. However, it still occurred during the more vertical phase Bitcoin’s recent bull market.

After several weeks of correction, last September saw the focus shift to $40,700. This was a turning point that ultimately led to BTC/USD reaching $69,000 new highs.

Analysts believe that the odds of a breakup to the $30,000 mark are higher than they think.

Rekt Capital summarizes “Weekly Close” alongside a chart showing target levels.

Theoretically, $BTC could have a Weekly Close higher than $43200 (black), to enjoy a green week in the next week. However, the Weekly Close is below $43200 and BTC could return to the red zone below.

BTC/USD candle chart annotated Source: Rekt Capital/ Twitter

Bitcoin closed at $42,000 after hovering around the level for what could be temporary relief for bulls.

Pentoshi, a fellow analyst and trader, predicted that the market would set a lower high. He also said that he believes that $40,700 will eventually fall.

The $30,000 floor last summer is an increasingly attractive target.

Overcast cash outlook: Consensus prevails

This week’s macro picture is especially complicated for those who love risk assets, and Bitcoin and other altcoins are no exception.

However, what the future holds varies greatly from one pundit or another.

It is widely believed that the United States Federal Reserve will raise interest rates in the next months. This will cause investors to de-risk and create headaches for crypto bulls. “Easy money,” which started flowing in March 2020 will be harder to find.

Arthur Hayes (ex-CEO of BitMEX) summarized the bearish perspective in his blog post last week.

He wrote, “Let’s forget about what non-cryptoinvestors believe; my reading of crypto investor sentiment is that they naively believe the network and user growth fundamentals will allow crypto assets continue their upward trajectory without interruption.”

“This is a recipe for disaster, as rising interest rates will have a negative impact on future cash flows. Speculators and investors will likely be compelled to sell or reduce their crypto holdings.”

This week, the U.S. consumer prices index (CPI), data for December is released. These numbers will likely contribute to the story of unexpected inflation gains.

Hayes is not the only one worried about crypto’s future. Pentoshi and others have also called for a temporary end of the bull run.

“And the last question is: can crypto ignore Fed if it decides that deflationary machete will be used? In a series tweets, Alex Krueger, an analyst on the topic, concluded that “I doubt it.”

“Don’t fight Fed” applies to both up and down. Houston is the problem if the Fed is too hawkish.

Some optimists remained in the room. Dan Tapiero, founder and CEO of 10T Holdingss, advised followers to ignore the recent turmoil and instead focus on a long-term investment opportunity.

He stated, “Most bullish macro background in 75 years.”

“Booming economy supported massively by negative real rates. The Fed will not equalize inflation-related rates. Keep your eyes on stocks, Bitcoin, and ETH. Avoid short-term volatility and hodl. Real Dollar cash savings will lose value.” Find the outlier… pic.twitter.com/zU1zRj1uXC
— Charlie Bilello (@charliebilello) January 7, 2022

Tapiero highlighted data that Charlie Bilello, founder of Compound Capital Advisors, had compiled.

RSI hits two-year lows

Even amid all the doom and gloom, there are signs that Bitcoin is not in a prolonged bearish phase.

Cointelegraph reports that on-chain indicators call for upside in large numbers — and the historical context supports those demands.

It’s Bitcoin’s relative Strength Index (RSI), which headlines this week, and has reached its lowest level in two years.

This low #Bitcoin RSI was only 2 times in the past 2 years. It looks like the bottom is coming and a bounce is imminent. Let’s see pic.twitter.com/qhQ1pD8yEl
— Bitcoin Archive (@BTC_Archive), January 9, 2022

RSI can be used to determine if an asset is “overbought”, or “oversold” at a particular price point.

The market is not willing to accept $42,000 as a low price, so a rebound should be made.

RSI, however, was soaring and in “overbought”, while BTC/USD traded at almost the same price last January.

“The Bitcoin RSI has fallen to its lowest level in two years. It is currently on the daily. The last two were March 2020 and May 2021. “And people flip bearish there / want to sell short,” Michael van de Poppe, a hopeful Cointelegraph contributor, said.

BTC/USD 1-day Candle Chart (Bitstamp), with RSI. Source: TradingView

Cointelegraph also noted similar bullish hints last week on the monthly RSI charts.

Hash rate recoups Kazakhstan losses

A second blip that occurred last week is from the realms of Bitcoin fundamentals.

Bitcoin’s network rate suffered a setback after reaching new highs in recent weeks. This was due to the fact that internet access was limited by the turbulence in Kazakhstan.

Kazakhstan, which accounts for 18% of the hash rate, has stabilized and has seen its hash rate return mostly to previous levels of 192 exahashes each second (EH/s).

One point, down to 171 EH/s. Responses to what may have reminded others of last May’s China mining prohibition appear to have lifted hashrate and maintained record-breaking miner participation.

Despite the chaos, Bitcoin’s network difficulty managed to show a slight increase over the weekend. It is now on track to continue this trend at its next automatic readjustment in less than two weeks.

Screenshot of the live Bitcoin hash rate chart. Source: MiningPoolStats

Dylan LeClair, an on-chain analyst, commented that “Going up forever” was his interpretation of the old mantra “price follows hashrate.”

China’s mining crisis caused the hash rate to drop by half. It took six months to recover the losses.

“What if…?”

PlanB, quant analyst and creator of the stock to-flow-based BTC price models, has long argued that it is time for a Bitcoin trend reverse.

Similar: Top 5 cryptocurrencies you should be watching this week: BTC. LINK. ICP. LEO.

PlanB is currently facing a test of his creations and the accompanying storms of social media criticism. However, PlanB remains optimistic when it comes to medium- to long-term price actions.

He acknowledged that he knew of people who had lost faith in the bitcoin bull market over the weekend.

“We are still only half way through the cycle (2020-2024). BTC is experiencing some turbulence at $1T but the yellow gold cluster at S2F60/$10T remains the target IMO (small black dots are 2009-2021 data).

Stock-to-flow cross-asset (S2FX) chart. Source: PlanB/ Twitter

He was referring specifically to the stock-to flow value of Bitcoin, gold, and other assets in his stock-toflow cross-asset model (S2FX). This model calls for an average BTC/USD exchange price of $288,000 during this halving cycle.

A closer comparison of Bitcoin this cycle and its two predecessors is possible. It shows a viable trajectory that begins with a U-turn now.

What if … pic.twitter.com/te36HkFAbQ
— PlanB (@100trillionUSD January 9, 2022

After failing to reach its goal in November, the floor model was discarded.