Bitcoin Weekly Outlook: Can the bears pose a threat to the bull run?
Bitcoin has changed its short-term market direction from bullish to bearish in the last two weeks.
The flagship cryptocurrency attracted sellers when it hit a new record high near $42,000. While the price has since fallen as much as 31.57 percent, it also recovered on understandable Bitcoin Blueprint buying sentiment near psychological support levels around $30,000.
Last weekend’s session was all about protecting the long-term bullish trend. Traders flocked to buy bitcoin after it experienced a dramatic drop from around $33,000 to as low as $30,931. The price retraced back above $33,000 during the early Monday session, marking its ninth downward rejection since January 4.
Josh Rager, the co-founder of BlockRoots.com, expressed optimism about the said bitcoin rebound. He predicted that the cryptocurrency will close above $34,000 this week, basing his theory on a so-called 21-day exponential moving average (21-EMA) that has predicted bullish and bearish trends in the past.
„Price is currently testing the 21 EMA, and a break and close above $34,000 on higher time frames would be a great start,“ the independent analyst said. „And would set this up as a bear trap before moving higher.“
What are the risks
In the last week of January, the economic calendar offers a series of events that can provide further insight into the state of the US economy. So far, the slowdown in the economy has driven investors to the safety of riskier safe-havens such as bitcoin, gold and equities.
On Tuesday, the US Conference Board will release its consumer confidence readings. It is expected to show the US economy in its early recovery phase, which traders would let pass as „soft data“. A similar report will be released by the University of Michigan on Friday, which will shed further light on the slowdown seen at the end of Q4/2020.
Weak readings are likely to drive the US government to aggressive protectionist measures, starting with an expansionary stimulus package to cushion the economy. This in turn could weaken the US dollar and limit the rise in long-dated US government bond yields. Overall, the fundamentals look bullish for the bitcoin market, albeit with a lag.
Meanwhile, the biggest event of the week is the US Federal Reserve’s first meeting of the year – although it is not expected to bring anything new on the forward guidance front. Analysts expect Chairman Jerome Powell to keep rates near zero until 2023 and not pursue a taper tantrum in their QE programme.