Bitcoin Volatility Continues as Bulls Struggle to Break Resistance
The last week of February has started off in a volatile mood for Bitcoin (BTC) as a crucial area of resistance fails to break. After a classic “fakeout” during low-volume weekend trading, BTC/USD is back below $25,000, with bulls still lacking momentum.
The largest cryptocurrency saw what looked like the next stage of its 2023 recovery last week, making swift gains and even tapping new six-month highs. However, February’s progress has been much slower and hard won than January’s 40% gains. How will the rest of the month pan out?
A critical monthly close is due, along with a potential external price trigger in the form of minutes from the United States Federal Reserve. Meanwhile, Bitcoin network fundamentals are due to leap to yet another all-time high, with miners in full recovery mode.
The upcoming week holds considerably fewer potential macro triggers than the last, with a sprinkling of U.S. data releases, including personal spending in the form of the Personal Consumption Expenditures Index (PCE). However, the event on most crypto pundits’ radar is the release of the minutes from February’s Federal Open Market Committee (FOMC) meeting at the Fed.
This was where the latest benchmark interest rate hike was decided, with expectations that Fed Chair Jerome Powell included talk of a moratorium on rate hike policy, if only theoretically. Any return of inflationary tendencies would boost U.S. dollar strength, which spent the last macro trading day of the previous week erasing prior gains.
Bitcoin bulls have a problem, which is becoming increasingly evident on short timeframes — the 200-week moving average (WMA). A classic “bear market” trend line, the 200WMA has acted as resistance since the middle of 2022, with BTC/USD spending more time below the level than ever before. Reclaiming the level would mark a conspicuous achievement, but all attempts have been met with flat rejection so far.
In a familiar silver lining, Bitcoin’s network fundamentals are keeping the bullish vibe firmly intact as the month draws to a close. The next automated readjustment will see difficulty adding an estimated 10% to its current tally. This will cancel out the previous readjustment’s modest decline to send difficulty to new all-time highs.
Raw data from MiningPoolStats meanwhile shows Bitcoin network hash rate also preserving its upward trend, remaining at over 300 exahashes per second (EH/s). Joe Burnett, head analyst at Blockware, described hash rate growth as “truly relentless.”
$25,000 is a headache for reasons beyond solid resistance — breaking above it could be an unsustainable move for Bitcoin. The latest findings from research firm Santiment suggest that crypto market sentiment becomes too greedy around those multimonth highs.
The ever-popular Crypto Fear & Greed Index meanwhile shows “greed” as the overriding sentiment flavor across crypto this week. The push to the highs for Bitcoin coincided with a reading of 62/100 for the Index, marking new highs since the November 2021 push to $69,000 on BTC/USD.
As the last week of February continues, Bitcoin traders and investors will be watching closely to see if bulls can break the resistance and push the price higher. With the FOMC minutes and network fundamentals both looking positive, the outlook for Bitcoin remains cautiously optimistic.