Bitcoin rose on Tuesday, crossing the resistance of the $16,300-$17,200 sideways range. Although the major cryptocurrency still failed to beat skeptical traders, we mark $18,157 as the next technical bullish target.
The danger of a bull trap
Almost matching its peak on December 16, the BTCUSD pair showed rare bullish momentum amid some of the lowest volatility ever seen during the holiday season.
Now traders and analysts are expecting an unpredictable reaction to upcoming macro data from the US. The Consumer Price Index (CPI) released on January 12 is expected to confirm the assumption that inflation is falling, offering a potential window of opportunity for risky assets.
Nevertheless, the crypto community is saying be cautious, which makes sense since there is still no sign of fundamental price support on this momentum.
Comments from Federal Reserve Chairman Jerome Powell disappointed markets, as he avoided mentioning the future course of monetary policy or the state of the economy itself.
Traders note that the real breakout or reset will come on Thursday, when the Consumer Price Index data is released. However, we should be cautious with the bullish sentiment, as yesterday's momentum may well prove to be a trap.
Some are calling for a "feel the urge for FOMO, especially this week," as this week's CPI could take prices back to last week's levels.
Traders have no faith in the major cryptocurrency
The conservative approach appeared symptomatic of the broader sense of apathy among market participants on the day, with little belief that BTC could put in a sustained rally.
The past weeks have seen continued low price predictions, with some of the best-known traders focusing on $12,000, $10,000 or even lower.
A bearish take stayed firmly in place, even among those who seemingly expect growth, but now insist that there was "not a single bullish confirmation yet" and the bearish trend persists.
Alarming volume indicators
It is worth noting that technically it is impossible to talk about a start of a global recovery until the price has settled above $18,157, and there is still quite a large margin of difference.
However, looking at the dominance in trading volume, one of the members of the network analytics platform CryptoQuant noted that we should fear the worst.
"In my six years with cryptocurrency, I've noticed something important. Healthy and sustained price movements start with bitcoins rising, followed by ethereum/altcoins. Usually when traders get bored on BTC, they start trading altcoins which are, in general, further on the risk curve. This makes them very fragile and easy to squeeze."
The dominance of altcoins now exceeds 50% of total volume, which potentially bodes well for bulls.
"Altcoin dominance is again above 50%. Be aware: when altcoins continue to dominate, there is a potential risk for further downside."
Future optimism is not out of the question
Despite being cautious, Bitcoin has been making a lot of noise lately due to the accumulation of whales. And this activity could possibly be part of a positive development in the overall crypto market.
BTC's performance in 2023 has been more active, as its current price is up 5.41% this year. Large bitcoin holders, known as whales, have renewed interest in the major cryptocurrency and are actively hoarding it.
According to online analytics provider Santiment, large bitcoin whales holding between 1,000-10,000 BTC are accelerating their accumulation. Over the past five days, these investors have added more than 20,000 BTC to their balances, representing a significant accumulation trend.
As a result, these bitcoin whales now hold a total of 4.57 million BTC, or 23.7% of the total circulating BTC supply. This accumulation may have contributed to the recent recovery trend seen in the price of bitcoin.
Small buyers are also accumulating in 2023
Santiment also reported that Bitcoin wallets of small and medium size have recently bought a large amount of BTC. These addresses hold from 0.1 Bitcoin to 100 BTC, and in the past half year, they have accumulated around 9% of their holdings to their stashes. The Santiment team stressed that this was one of the most aggressive purchasing cycles in the history of crypto.
Moreover, according to data analysis, it appears that these investors tend to believe in the long-term prospects of the major cryptocurrency and are willing to maintain their positions despite short-term market fluctuations.
It is important to emphasize that despite a difficult 2022, many BTC holders are withdrawing their funds from centralized exchanges rather than selling the coins.
It is worth remembering that according to data provided by Glassnode, it was observed that the number of addresses holding more than 0.01 Bitcoin had reached an all-time high of 11,464,621. Similarly, addresses containing at least 1 BTC have just hit an all-time high of 981,290.
Also, the supply volume, which was at a high 10 years ago, just reached a new all-time high of 2,606,573.215 BTC. At the same time, the percent of bitcoin's supply that was last active two or more years ago is also at an all-time high of 48.09%.
This data shows that interest and confidence in BTC is not waning, despite recent market events. But in the current situation, no optimistic conclusions about the end of the bear market should be drawn until the price is above the June lows.
