Could 2022 be a bullish year? Not many believe it, but short-term volatility should still pass, analysts say this week.
Bitcoin (BTC) is starting a new week in a strange place, very similar to where it was this time last year.
After what various sources have described as a full 12 months of “consolidation,” BTC/USD is sitting around $42,000 – almost exactly the same level as the second week of January 2021.
The ups and downs in between have been significant, but essentially Bitcoin remains in the middle of a now-familiar range.
The outlook varies by perspective, with some saying new all-time highs are more than likely this year while others are calling for many more months of consolidation.
With cryptocurrency sentiment at one of its lowest levels on history, Cointelegraph analyzes what could change the status quo on shorter timeframes in the coming days.
Will $40,700 Hold?
Bitcoin had a rough weekend as the latest in a series of strong downsides provided support near $40,000.
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hit $40,700 on major exchanges before recovering, a correction that has been ongoing ever since.
Ironically, it was this level that took the spotlight on the same day in 2021 that nonetheless fell during what turned out to be a more vertical phase of Bitcoin’s recent bull run.
Last September, attention also returned to $40,700, which marked a turning point after a multi-week correction and eventually led to BTC/USD climbing to an all-time high of $69,000.
However, the chances of a break into the $30,000 zone are now necessarily higher among analysts.
“Weekly close is upon us,” summarized Rekt Capital along with a chart of target levels.
“Theoretically, there is a possibility that $BTC could make a weekly close above $43,200 (black) to enjoy a green week next week. However, the weekly close is below ~$43,200 and BTC could return to the red below.”
Annotated BTC/USD candlestick chart. Source: Rect Capital/Twitter
Bitcoin eventually closed at $42,000 as it hovered around this level, which could prove temporary relief for the bulls.
“I think the market is making a lower high,” predicts fellow analyst Pentoshi, adding that he believes $40,700 will eventually drop.
Meanwhile, an increasingly tempting target sits at the $30,000 mark reached last summer.
A consensus is emerging on the bleak prospects for cash
The macro picture this week is particularly challenging for risk takers, and Bitcoin and altcoins are no exception.
However, what the future holds varies greatly from expert to expert.
The general consensus is that the US Federal Reserve will start raising interest rates in the coming months, which will force investors to reduce their risks and give crypto bulls a headache. The “easy money” that started rolling in March 2020 will now be much harder to come by.
The bearish view was clearly articulated by former BitMEX CEO Arthur Hayes in his latest blog post last week.
“Let’s forget what non-crypto investors believe; My take on crypto investor sentiment is that they naively believe that the fundamentals of network and user growth across the complex will allow crypto assets to continue their uptrend,” he wrote.
“To me, this sets the stage for serious dilution, as the adverse impact higher interest rates will have on future cash flows will likely prompt speculators and margin investors to dump or heavily discount their crypto assets.”
This week sees the release of US consumer price index (CPI) data for December, numbers that are likely to inform the story of the unexpected surge in inflation.
Hayes is far from the only one worried about what the Fed could bring for crypto this year, and Pentoshi, among others, is also calling for a temporary end to the bull market.
“And the final question: can cryptocurrency ignore the Fed if it decides to wield the deflationary machete with a vengeance? I doubt it,” concluded analyst Alex Kruger in a series of tweets on the subject this weekend.
“Don’t fight the Fed” goes both ways, up and down. If the Fed is *too aggressive* than Houston, we’re in trouble.”
A few optimists remained in the hall. Dan Tapiero, founder and CEO of 10T Holdings, advised se