Bitcoin (BTC) has kicked off the year with a bang, much to the surprise of weary investors and their bearish outlook for 2023.
For the first time since the collapse of FTX brought the already hobbled cryptocurrency markets further to their knees, the world’s largest digital asset surpassed the psychological US$21,000 resistance barrier, first on Saturday and then again this Monday, January 16.
Concurrent with one of the strongest two-week bull runs we’ve seen in 20 months, trading volumes also saw a substantial uptick, a clear sign of greater engagement through the exchanges.
BTC volumes and market price shoot up – Source: blockchain.com
Looking at the moving averages (MA), the 50-day MA is closing the gap on the 100-day MA, suggesting that BTC’s short-term price action is outpacing the long-term; generally considered a bullish signal.
Retail investors appear to be the driving force behind BTC’s recent surge, if CoinShares’ latest digital asset funds report is anything to go by.
“Digital asset investment products saw minor inflows totalling US$9.2mln last week, while trading volumes remained low at US$866mln for the week, both suggesting that the recent rally in digital assets was not investment product led,” read the CoinShares report.
This could be a good thing – if institutional investors decide to add their weight to the bull run, it will encourage even more price momentum.
Short sellers got burned to the tune of US$500mln on Saturday alone as the exchanges moved to liquidate bets against the BTC price. That figure extends beyond one billion across the latest seven-day period.
BTC’s price rally leaves the short sellers short – Source: https://www.coinglass.com/LiquidationData
Where is Bitcoin going next?
We could see BTC move higher, but it will be contingent on a confluence of a few macro factors.
Traders will want to keep a keen eye on economic data emerging from the US in the coming days and weeks.
The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December 2022, the lowest since October 2021, hitting market forecasts.
Given the hope of a softer approach to interest rate hikes, the US Dollar Index (DXY), which historically moves inverse to BTC, started to fall.
Any explicit dovish comments emerging from the Fed could prove a powerful catalyst for BTC.
The next logical move would be US$25,000, where BTC was last seen in mid-August 2022 before a sharp reversal.
Another bullish factor is the strong sell wall pitched at US$20,000 on Binance’s BTC/USDT pair, the most liquid of all trading pairs accounting for 20% of all exchange volumes.
Buyers (green) have marked their position at US$20,000 – Source: binance.com
Since buyers will be willing to step in at the US$20,000 resistance point, it could be difficult for the bulls to drop the price any lower than that.
Let’s just hope we don’t see another FTX-shaped cataclysm in the days and weeks ahead.