Bitcoin and Ethereum remain in a sideways channel. BTC has failed to break above $45,885 twice. The lack of demand for BTC as a hedge asset, coupled with the latest US CPI data, puts Bitcoin's continued rebound into question. Ethereum is unable to break out of its sideways trend as well.
According to a report by Glassnode, the steep drop since November put many buyers underwater - the coins they bought are now worth less than what they paid for. The average price investors paid for the coin over the last five months is $47,000. Anyone who bought the asset during that period has probably lost money and might not be inclined to buy more until they break even.
This can be clearly seen on the Glassnode's chart:
Currently, BTC is down by 37% since its November peak of $69,000, pushed down by Fed actions and falling demand for risk assets. The regulator's monetary tightening is removing liquidity from the markets, including the crypto market. Riskier assets such as cryptocurrency perform poorly in these conditions as traders pull back from high-flying investments. By doing so, the Federal Reserve is trying to tackle high inflation.
According to the latest data, US CPI gained 7.5% YoY in January, compared to 7% in December 2021. Monthly inflation increased by 0.6% last month, pushed up by rising food and energy prices, as well as rents. The core CPI, which does not include energy, food, tobacco and alcohol prices, rose by 6% YoY - the highest level since 1982. Month-over-month, the core index increased by 0.6%.
Above $47,000 lies the 200-day SMA line at about $49,000. This line is a widely-used indicator of determining market trends in medium term.
Event though January was a rough month for Bitcoin, the cryptocurrency has fared much better over the past few days. Many traders and investors hope for an uptrend in February ahead of the Fed interest rate hike in March. The regulator is expected to increase the rate by 0.5%. According to Coinmarketcap, BTC has added more than $100 billion to its market cap since the beginning of February.
Is the cryptowinter over?
Some experts assume that $33,000 could be the bottom for BTC and that there is now much more asymmetry to the upside than downside. Furthermore, the cryptocurrency has broken out of the downtrend that had been in place since the fall and managed to close above its 50-day MA on Monday for the first time in 81 days. This is a strong bullish signal, as BTC has never recovered so rapidly after its crash. The US inflation data was not detrimental to the asset - it could rise over the next couple of weeks, provided that technical factors are taken into account.
On the technical side, BTC is trading above its support level of $42,695, which is a good sign. If bitcoin remains above that level, increased demand could help the coin break above $45,580. A successful breakout of the is level would open the way towards the highs at $48,554 and $51,810. If Bitcoin breaks below $43,128 under renewed pressure, it could fall sharply towards the lows at $41,070 and $38,700. Renewed activity of major bullish traders could be expected in this area.
Ethereum has managed to successfully settle above $3,000, thanks to efforts by bulls. ETH could again test resistance at $3,280. There is no demand for the coin above this price level at the moment. If Ethereum manages to break above the resistance, it could then rise towards $3,455 and $3,670. However, if ETH dives below $3,000, it could result in a sell-off at $2,750. Afterwards, Ethereum could go down towards the low at $2,470, where major players would likely come into play once again.