Crypto Technical Analysis Report | 2nd-Feb-2023

The crypto market is awaiting the Federal Reserve’s first interest rate decision of 2024 with bated breath. Speculations from the CME, indicating a 96.9% likelihood of unchanged interest rates, are causing ripples. However, the looming second decision in March, with a 47% chance of a 25 basis points rate cut, is keeping investors on edge. The upcoming release of the January unemployment rate in the United States adds to the economic fervour, potentially influencing market sentiment. The Federal Reserve’s decision on interest rates serves as a pivotal economic lever that traditionally impacts both traditional and crypto markets. If the interest rate remains unchanged, it might maintain the status quo, potentially stabilising investments in assets like Bitcoin and Ethereum. Conversely, a rate cut could signal economic caution, potentially diminishing the appeal of risky assets like crypto assets. On the other hand, it might attract investors seeking higher returns in the crypto market if traditional investments face challenges.

Bitcoin has witnessed a three-day downtrend, primarily influenced by a hawkish stance from the Federal Reserve and substantial outflows from Grayscale. The price dipped around 1.8%, reaching as low as $41,860 on Feb. 1. This descent is part of a broader correction initiated two days ago when the price faced resistance at a crucial level of $43,850. Several factors contribute to Bitcoin’s current decline, including a recent period of distribution by miners. Notably, the 30-day change in the Bitcoin supply held in miner addresses has been negative since Nov. 11. This suggests that miners have been selling their BTC holdings, particularly before and after the approval of Bitcoin ETFs. Additionally, concerns about outflows from the Grayscale Bitcoin Trust (GBTC) and potential Bitcoin releases from the now-defunct Mt. Gox exchanges have added to market uncertainties this week.

In the weeks preceding the approval of the spot Bitcoin ETF, the price of Ether reached a year-to-date high, surpassing $2,700. However, it experienced a decline, aligning with the broader market after the ETF approval. The current week marks an attempt by Ether’s price to initiate a recovery, driven by a surge in network activity. Traders are optimistic about the potential approval of a spot ETH ETF, anticipating a substantial rise in Ether’s price in the days leading up to and following the approval on May 23. Network data reveals impressive statistics, with 101,000 new ETH addresses daily, 484,000 unique addresses actively engaging with the blockchain, and network activity approximately 30% higher than it was 90 days ago. This indicates a growing user base conducting transactions, deploying smart contracts, and participating in decentralised applications (DApps).

In the macro set up,  On Jan. 31, the U.S. central bank opted to keep interest rates steady within the range of 5.25% to 5.5%, with Chairman Jerome Powell dampening expectations of a rate cut in March. Powell indicated that rate cuts would only be considered when there is greater confidence in a sustained reduction in inflation. The Federal Reserve’s hawkish stance is perceived as negative for assets like Bitcoin. The absence of a rate cut implies that borrowing costs will remain elevated, potentially leading to reduced investment in riskier assets like crypto assets. The decision aligns with the widely anticipated market predictions, maintaining interest rates between 5.25% and 5.5%.

Technical Outlook:

Bitcoin:

BITCOIN after giving a breakout above the key resistance of $28,500 witnessed a sharp rally and the prices surged almost by 60.5% and made the high of $48,969. The asset failed to give a daily closing above the key resistance of $48,000 and saw some profit booking  and the prices dropped to $38,555. Post this move BTC made a ‘hammer’ candle where the lower longer shadow indicates buying at the dip and the prices have raised up to $43,882. The asset has a support at $40,000 and $36,500 whereas to further rally it needs to break, close and sustain above $48,000.

Ethereum:

ETH after breaking the key resistance of $2,145 witnessed a sharp rally and the prices surged up to $2,717. The bulls however failed to push the prices above the key resistance level of $2,750 and saw some sharp profit booking from these levels. The prices corrected almost by 20% and dropped to $2,168. ETH retested and bounced back from the support of $2,150 and went up till $2,391. ETH has a strong resistance at $2,400 and $2,750.

Binance Coin:

BNB was facing stiff and multiple resistance at $255. The bulls finally gave a breakout above the long held resistance and the prices surged up to $338.3. The asset made a ‘Shooting Star’ candle at the high and it witnessed a sharp correction and the prices dropped to $289. Currently, BNB is trading in a range from $290 to $315 with declining volumes. Breakouts on either side of the range with good volumes will further decide the trend for the asset.

Weekly Snapshot:

Market Updates:

• Asset management firm Valkyrie has added digital asset trust company BitGo as a custodian for its recently launched spot Bitcoin exchange-traded fund (ETF).
• Ethereum developers plan to set a mainnet launch date for the Dencun upgrade on Thursday, Feb. 8, which will introduce several Ethereum Improvement Proposals (EIPs), including proto-danksharding, which is expected to drive down transaction costs on layer-2s.
• Crypto exchange Binance froze $4.2 million worth of XRP from the $112 million hack on Ripple co-founder Chris Larsen’s personal wallet on Jan. 31, making it the largest hack of 2024 so far.