Recent developments have sent shockwaves through the community as Bitcoin (BTC) speculators initiated a staggering $5 billion sell-off. This abrupt market movement has left investors and enthusiasts alike scrambling to understand the underlying factors at play and how they might influence the broader crypto ecosystem in the coming week.
From regulatory shifts to technological advancements, each factor contributes to the unfolding narrative, offering crucial insights for those navigating the volatile crypto markets. Here’s what to look out for this week.
Bitcoin enters a dark period
Since the approval of Bitcoin ETFs in the United States, the coin has been on a losing streak for 5 days. As of this writing, the price of Bitcoin (BTC) is $42,679.03, with a 24-hour trading volume of $19,814,523,789.68. This indicates a -0.38% price loss in the last 24 hours and a -4.37% price decline in the last 7 days. Furthermore, the fear and greed index has fallen to a neutral position of 52.
The global crypto market cap is $1.76 trillion today, down 0.46% in the last 24 hours and 72.69% a year ago. As of today, BTC has a market cap of $834 billion, reflecting a 47.32% domination. Meanwhile, stablecoins’ market cap is $135 billion, accounting for 7.67% of the total crypto market cap.
Bitcoin begins a new week with two competing narratives: some believe the decline that followed the ETF launch will signal a healthy retest of support, while others believe the previous local peak will remain in place for an extended period of time.
A grace period of up to two weeks may elapse prior to the onset of additional significant catalysts. Triggers for U.S. macroeconomic data are anticipated to subside slightly prior to the end-of-month interest rate decision by the Federal Reserve.
Speculative investors who sold billions of dollars worth of Bitcoin at a loss last week may also be exhausted.
Currency performances this week
On Tuesday, NY Empire State Manufacturing will attract investment attention. Improving conditions in the manufacturing sector would lend weight to the idea of a soft landing. Investors should pay attention to US retail sales numbers for December (Wednesday).
A significant increase in retail sales might boost demand-driven inflation and cause the Fed to delay interest rate cuts.
The US jobless claims and Philly Fed Manufacturing figures will be in the spotlight on Thursday. A stable labor market and manufacturing sector would further support betting on a mild landing.
Michigan Consumer sentiment figures for January will cap off a hectic week for the US dollar. An unanticipated increase in consumer mood may indicate an upward trend in consumer expenditure.
On Monday, German wholesale pricing and GDP figures for 2023 drew investor interest. The EUR/USD may encounter pressure if the German economy contracts more than predicted. However, Eurozone industrial production and trade data should also be considered.
The Pound will be in focus on Tuesday as labor market numbers are released. The Bank of England continues to be concerned about wage increases. Softer wage growth and an increasing UK unemployment rate may fuel betting for a Q1 BoE rate decrease.
On Wednesday, UK inflation data for December will impact predictions about the timing of a BoE rate cut.
BTC market sentiment
BTC/USD reached $49,000 on the day of the ETF’s introduction, but the enthusiasm did not last long.
A further pullback sent the market down to the lower end of its established trading range, but sellers were unable to achieve a true retest of the $40,000 level.
The length of the retreat from $49,000 appeared to surprise the majority of bulls. According to analytics website CoinGlass, on January 12, liquidated almost $112 million in BTC longs, making it one of the most expensive days in recent months.
Fed cuts and CPI data effects
Those seeking a reprieve from volatility may get it this week, at least on the global level. Aside from ETF trade, U.S. data prints are expected to slow in the coming days, with unemployment data topping the list of inbound releases.
With only two weeks until the next Fed meeting to decide on interest rate changes, the atmosphere around inflation remains tense. Last week’s little-noticed Consumer Price Index (CPI) figures showed prices rising faster than predicted in December 2023.
While markets do not expect the Fed to lower rates this month, pundits did not miss the figures. Reacting, trading resources According to the Kobeissi Letter, the Federal Reserve’s job is “not done yet.”
Despite this, it added, markets expect rate cuts – a windfall for risk assets such as cryptocurrency — to come in quick succession beginning in March.
More crypto market panic selling
For many, ETF week ultimately turned into a week of Bitcoin sales rather than purchases.
Although institutions were finally able to increase their BTC exposure, price movement exemplified volatility’s classic psychological impact.
At $50,000, whales gathered in anticipation of distributing to latecomers, which was too much for bulls to bear, whereas the reversal towards $40,000 sparked widespread hysteria.
This was demonstrated by the percentage of Bitcoin that was sold for a loss on its purchase price. As per the findings of Glassnode, an on-chain analytics firm, this amounted to 88,000 BTC ($3.75 billion) on January 12. More on this stance can be expected this week.