"The most bullish macro backdrop in 75 years" - 5 things to watch about Bitcoin this week

Bitcoin started the new week at an odd level — eerily similar to this time last year.

After what various sources describe as a 12-month "adjustment," BTC/USD is around $42,000, almost exactly where it was in the second week of January 2021.

The ups and downs during this period have been great, but basically Bitcoin is still in the now familiar range.

Different people have different views on the outlook - some believe that record highs are highly likely this year, while others believe that there will be more corrections in the coming months.

With crypto market sentiment at an all-time low, Cointelegraph analyzes what could change the landscape on a shorter time frame in the coming days.

Can $40,700 Hold?

Bitcoin has had a rough weekend, with the latest in a series of sudden downside moves near the $40,000 support level.

Data from Cointelegraph Markets Pro and TradingView shows that BTC/USD rebounded after hitting $40,700 on major exchanges and has remained correct since then.

Ironically, on the same day in 2021, it is this level that is getting attention, despite the fact that it came during a more vertical phase of Bitcoin's recent bull run.

In September, the focus also returned to $40,700, a turning point after a few weeks of correction that eventually saw BTC/USD climb to an all-time high of $69,000.

But now, analysts believe that the probability of falling below the $30,000 range has increased unreservedly.

"Weekly close is coming," Rekt Capital concluded alongside a chart with target levels.

“Theoretically, it is possible for BTC to close the week above $43,200 (black) and enjoy a green next week. But with a weekly close below $43,200, BTC may revisit the red zone below.”

BTC/USD candle chart source: Rekt Capital/Twitter

Bitcoin finally settled at $42,000, hovering around this level may provide temporary relief to the bulls.

"I think the market will enter a lower high," predicted another trader and analyst, Pentoshi, who sees $40,700 eventually falling.

Meanwhile, an increasingly attractive target was the $30,000 reserve last summer.

Consensus emerges on pessimistic outlook for cash

The macro picture this week has been particularly complicated for risk asset enthusiasts, and bitcoin and altcoins are no exception.

However, analysts have quite different views on what will happen in the future.

It is widely believed that the Federal Reserve will start raising interest rates in the coming months, making investors de-risk and causing headaches for cryptocurrency bulls. The "cheap money" that began flowing in March 2020 will now be harder to come by.

Former BitMEX CEO Arthur Hayes succinctly summed up this bearish view in his latest blog post last week.

“Let’s forget about the perception of non-crypto investors; my reading of crypto investor sentiment is that they naively believe that overall network and user growth fundamentals will allow crypto assets to continue their momentum,” he wrote.

“In my view, this represents a serious failure, as the detrimental impact of rising interest rates on future cash flows could prompt speculators and fringe investors to sell or significantly reduce their holdings of cryptocurrencies.”

The U.S. is due to release consumer price index (CPI) data for December this week, which could account for a surprise rise in inflation.

Hayes isn’t the only one worried about what the Fed might bring to cryptocurrencies this year, Pentoshi and others also see the bull market as over for now.

“The last question is, if the Fed decides to go all in on wielding the deflationary machete, can cryptocurrencies ignore it? I doubt it,” analyst Alex Krueger concluded in a series of tweets on the subject over the weekend road.

There are also optimists. 10T Holdings founder and CEO Dan Tapiero told fans to "ignore" the recent plunge and focus on an unchanging long-term investment opportunity.

"The most bullish macro backdrop in 75 years," he said.

“Massive negative real interest rates underpin a thriving economy. The Fed will never match rates with inflation. Long stocks, bitcoin, and ETH. Hold through short-term volatility. Real dollar cash savings will continue to depreciate.”

Below is the effective fed funds rate and inflation rate with an unemployment rate of 3.9% (the same as today).

Find outliers...

— Charlie Bilello (@charliebilello) January 7, 2022

Tapiero highlighted data compiled by Compound Capital Advisors founder and CEO Charlie Bilello.

RSI falls to two-year low

In the gloom, not everything points to a long-term bearish phase for Bitcoin.

As Cointelegraph has been reporting, on-chain metrics are rising massively, and the historical context supports these demands.

Bitcoin’s Relative Strength Index (RSI) continued its strength this week, reaching its lowest level in two years.

The RSI is a key indicator used to determine whether an asset is "overbought" or "oversold" at a particular price point.

The bottoming out of the $42,000 low shows that the market does think that these levels are too extreme and should be balanced by a bounce.

In January last year, by contrast, the RSI was ridiculously high and, conversely, well within the “overbought” range, while BTC/USD was trading at that level.

“Bitcoin RSI is at a 2-year low on the daily line. March 2020 and May 2021 were the last. And people flip bearish/want short here,” commented Cointelegraph contributor Michaël van de Poppe .

BTC/USD 1-day candle chart (Bitstamp) Source: TradingView

Cointelegraph found similar bullish signs in last week’s monthly relative strength index chart.

Hashrate makes up for Kazakhstan’s losses

Another sign that it has “healed itself” emerged last week from Bitcoin’s fundamentals.

After hitting record highs in recent weeks, bitcoin's network hashrate took a hit when unrest in Kazakhstan affected internet availability.

Kazakhstan has about 18% of the hashrate, and since then, the hashrate has stabilized and basically returned to the previous level of 192EH/s per second.

Despite the turbulence, Bitcoin’s network difficulty registered a small increase this weekend and is now on track to repeat the increase in the next automatic adjustment in less than two weeks.

Screenshot of real-time Bitcoin computing power chart Source: MiningPoolStats

“Up forever,” on-chain analyst Dylan LeClair commented on the classic saying “price follows hashrate.”

For example, a mining rout in China resulted in a 50% drop in hashrate. It took the company about six months to recoup its losses.

"What if...?"

Quantitative analyst PlanB has been saying that it is time for Bitcoin to reverse the trend, and he is the creator of the Bitcoin price model stock-flow.

Right now, PlanB is weathering the tests of its creation -- and the ensuing storm of criticism on social media -- yet it remains more bullish than most when it comes to medium- to long-term price action.

“I know some people have lost faith in this bitcoin bull market,” he admitted this weekend.

"However, we are only halfway into the cycle (2020-2024). And while BTC has experienced some volatility at $1 trillion, the S2F60/$10 trillion position in the yellow group (the little black dot is 2009-2021) gold data) is still the target."

Stock-to-Flow Cross Asset (S2FX) Source: PlanB/Twitter

He was referring to the stock-to-flow value of bitcoin, gold, and other assets as part of his stock-to-flow cross-asset (S2FX) model, which calls for an average BTC/USD price of $288,000.

On a closer look, however, a more simplified comparison of this Bitcoin cycle and the two preceding it sees a plausible trajectory to turn the corner from now on.

Another independent model, the floor model, called for a bitcoin price of $135,000 (about 345,000 yuan) by the end of December last year, and has since failed to meet the target for the first time in November last year. was abandoned.

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.