Bitcoin held above the $21,000 mark on Monday, after a week where it rose nearly 25%. But how sustainable will this price rally be for BTC?
The recent bitcoin numbers could make this January 2023 the best monthly gain for the currency since October 2021 if it continues.
Moreover, this recent surge caused bitcoin’s popular “Fear and Greed” Index to move out of “Fear” for the first time since April 2022 and into the “Neutral” range.
This metric determines the general sentiment of the community about the mother cryptocurrency. This indicator takes into account price volatility, comments on social networks, and polls, among other indicators. In this way, it measures the momentary sentiment of investors about the main cryptocurrency.
The index provides scores between 0 (“Extreme fear”) and 100 (“Extreme greed”). This weekend, it stood at 52 (Neutral).
The metric has been in the “Fear” or “Extreme Fear” zones for nine consecutive months, due to the prolonged bear market and adverse events surrounding the cryptocurrency industry (the collapse of Terra, the bankruptcy of Three Arrow Capital (3AC) and the collapse of FTX).
Bitcoin whales are still cautious
Despite the surge, new data seems to indicate that large investors and institutional players remain cautious about bitcoin and see the sudden price jump as a temporary relief rally.
“A relief rally is expected until the 7 simple moving average (SMA) reaches the 356 SMA, and a real bull market could start when the 7 SMA breaks above the 356 SMA,” wrote CryptoQuant analyst Woominkyu.
The expert evaluated the activity of BTC wallets with more than $1 million in unspent transaction output (UTXO), comparing them to previous market trends to determine whether the recent surge in the cryptocurrency’s price marked the start of a new bull run, or if it is just a temporary rally.
Given that bitcoin whales remained resilient, despite the steady decline in the value of BTC over the past year, Woominkyu noted “the current situation is no different from previous cycles”.
As such, he expects large investors to continue to accumulate BTC “and disappear at the end of the next bull market”.
Meanwhile, fellow CryptoQuant analyst MAC_D said that “it is difficult” to say that there is a buying trend by institutional investors.
The expert based his analysis on the BTC fund volume index; the fund holdings index and over-the-counter transactions and noted that, given that the former remained very low, it is possible that there is not a great deal of interest from the whales.
A look at the BTC fund volume index revealed that “institutions’ BTC holdings are declining quite a bit,” he wrote.
Moreover, despite the price rally, he mentioned that there were also no unusual over-the-counter BTC transactions over the past week.
“Usually, in the background, institutional investors want to buy quietly through OTC trading. However, this trade was simply actively traded only on the exchange, and there were no unusual transactions on the chain,” he explained.
The inevitable comparisons
Glassnode’s James Check compares this new cycle to 2021, when bitcoin got off to a good start and ended up hitting record highs.
In a YouTube video, he noted that the top two cryptocurrencies by market capitalization, BTC and Ethereum (ETH), have experienced little volatility in recent weeks and that, historically, such periods lead to “explosive market moves”.
“It’s really quite remarkable, and there are very few instances in history where bitcoin and any digital asset really go to sleep at this level in a volatile environment,” he said.
For the time being, there is growing hope among market players that central banks will pursue a more supportive monetary policy by pausing interest rate hikes or reducing them at some point this year.
The consumer price index (CPI) declined by 0.1% in December, in line with Dow Jones estimates. However, the CPI rose 6.5% compared to 2022. This is lower than the 7.1% jump in November and the peak rate of 9.1% in June.
This also had a positive impact on the bitcoin price and contributed to the current uptrend.
Follow us on our social networks and keep up to date with everything that happens in the Metaverse!.
Twitter Linkedin Facebook Telegram Instagram