Bitcoin price is heading towards the weekly low of $22,300: will we see a bounce?

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Bitcoin managed to show quite an outstanding performance this month, but the weekly low of $22.3k raised some skepticism about Bitcoin price action in the coming months. In this article, we will address whether Bitcoin will rally, taking into account the many factors at play.

Market growth causes increased mining revenue for Bitcoin

Bitcoin mining is showing signs of growth, with revenue from payments and transaction fees seeing a 50% increase in the first month of 2023. Despite profits falling below $14 million at the end of December 2023, 2022, this recent increase in revenue measured in US dollars is an indicator that Bitcoin is still on the path to a sustainable recovery. Over the course of 30 days, Bitcoin mining profits increased from $15.3 million on January 1 to approximately $23 million.

Bitcoin’s hash rate continues to reach new heights as more miners join to provide power and ensure the security of the network. With approximately 300 exhashes per second, Bitcoin operates independently of any central authority. However, the proof-of-work consensus method used in Bitcoin faces criticism for its high power consumption, but efforts to use renewable energy for Bitcoin mining operations are being made to address this concern.

Bitcoin’s positive momentum was met with uncertainty on January 30 as the market environment was tense, but the first three weeks of 2023 saw a significant rise in the bitcoin price. The bull run took the price from its low of $16,499 on Jan. 1 to $23,200, as reported by CoinMarketCap, which represents an increase of 47%. Despite the strong comeback seen in the fourth week, BTC showed signs of volatility amid numerous global events.

Overall, the Bitcoin mining industry is showing signs of growth, with a 50% increase in revenue measured in US dollars. Despite the challenges faced in the past, the hash rate continues to reach new records and efforts are underway to power mining operations with renewable energy. Despite the uncertainty in the market, the bitcoin price experienced a significant increase in the first three weeks of 2023, but signs of volatility remain in the face of major world events.

Institutional investment to get Bitcoin out of the bottom

In January, Bitcoin experienced a 40.5% increase in value, surpassing $22,500 on January 20. Bitcoin’s rise in value reflects the overall improvement in the stock market, which has been fueled by the lifting of China’s COVID-19 restrictions.

Major entertainment and e-commerce companies posted massive gains during this time. Apple is expected to announce a massive $96 billion profit for 2022 on February 2, surpassing Microsoft’s $67.4 billion profit.

According to a Matrixport study, 85% of recent Bitcoin purchases were made by US institutional investors, indicating that major players remain interested in cryptocurrencies. Despite the 49% rise in price from the November 21 low of $15,500, Bitcoin is still down 39% in the past year.

On the other hand, the premium of USD Coin, which measures the difference between China-based peer-to-peer trades and the US dollar, is 3.7%. It is down from a 1% discount two weeks ago, indicating increased demand for stablecoin buying in Asia. The Bitcoin futures premium, a favorite among professional traders, has been neutral since January 21, with an annualized premium of more than 4%.

However, the market is cautious about the Federal Reserve’s campaign to raise interest rates. The turn of this campaign in 2023 could affect the performance of the stock market and reduce the attractiveness of Bitcoin as an option for inflation protection. Although current economic indicators suggest a moderate correction, traders are closely watching the Fed’s actions.

Leading indicators show that the correction is enough to alleviate inflation, but the market is cautious about any possible change in the Federal Reserve’s interest rate hike campaign. This pivot, if it occurs in 2023, could limit stock market performance and reduce the attractiveness of Bitcoin as a means of inflation protection. Traders closely follow the Fed’s moves to better understand the future of the market.

Bitcoin Market Dominance Indicates a Bounce

Bitcoin’s dominance over other digital assets reached a new high in January 2023. The Bitcoin Dominance Index, which tracks the proportion of Bitcoin’s market capitalization compared to the rest of the crypto market, stood at 44.82%. on January 30, its highest level since June 2022.

Investors generally flock to Bitcoin during bear markets due to its greater liquidity and stability compared to alternative cryptocurrencies, which has contributed to its growing market share. Bitcoin is currently up 38% year to date, surpassing the 30% rise of the second largest cryptocurrency, Ethereum.

Technical analysis suggests that the Bitcoin Dominance Index may continue to rise in the coming weeks as it recovers to its 50-week exponential moving average. A market analyst predicts that the index could reach 46%, in line with the upper trend line of a large descending channel pattern.

The current trend in the crypto market suggests that Bitcoin’s dominance index may rise further in the short term, however the long-term outlook is uncertain. There is a bearish argument that the index may fall after testing its resistance level, as it did before.

On the other hand, if the token continues to hold its support area, it may see a rally and increase its market share, potentially up to 20%. Looking at Bitcoin’s performance on January 31, the token hit a low of $22,700, while it rallied throughout the day to $23,160 at the time of writing. Which suggests that the weekly low found by bitcoin was only for a short time and that the token may very well be on an upward trajectory from here.

Conclution

Rising Bitcoin mining revenue, coupled with increasing market dominance and positive support from institutional investors, indicate that Bitcoin is on track to recover, rallying back to the monthly high it hit in January. That being said, a bunch of other factors, like changes in the interest rate outlook, can slow down this long-awaited rally.

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