News / Low Volumes and Volatility: What Bitcoin (BTC) Expects

Low Volumes and Volatility: What Bitcoin (BTC) Expects


Bitcoin (BTC) retreated under $42,000 in the new week after attempting to rally above $46,000 very briefly. BTC now faces several factors that may increase market volatility. At the current level, BTC has almost no net gains in the past 12 months, and most altcoins have erased a significant percentage of their peak value.ย 

The late weekly close was also signaling toward volatile prices this week, with no upward momentum. 

But this factor may not immediately translate into sliding prices, instead changing the map of long and short positions. 

ETH Sinks on Talks of Centralization

BTC still managed to hold up better, while Ethereum (ETH) sank on slim weekend trading and retreated to the $2,800 range. On Monday, ETH still traded at $2,855.16, pressured by renewed rumors of significant hidden centralization and dependence on the Infura service for complete node information

The overall market cap of all digital assets remained just under $2 trillion, though trading volumes fell by about 50% compared to November 2021. For BTC and ETH, trading activity also thinned out by about 50%. At this point, even smaller inflows of funds can cause price movements. 

Because of low volumes, the current market valuations can be supported with only small increments in the supply of stablecoins like Tether (USDT) and USDC. At current price levels, major coins need slimmer volumes to support price actions, but are also at risk of bigger price swings with eventual liquidations. 

Actual Coin Buying Becomes More Difficult

The trend of removing BTC from exchanges continues, due to the possibility to bet against the BTC price without actual coins on derivative markets. BTC is still under the potential influence of above 94,600 coins intercepted by US law enforcement and held until the Bitfinex hack is settled.

BTC held on exchanges is at levels not seen since 2018, which is seen as a minor bullish factor for the leading coin. 

The holding of physical coins is still a long-term bet for the usability of BTC as a store of value. 

Bitcoin Mining Sets New Record

With the shift of Bitcoin mining to the USA, the hashrate also set a series of records and has kept to its highest levels. 

BTC mining activity is now above 240 EH/s, according to Glassnode data. Other data point to a similar high range and high mining difficulty. 

BTC mining has expanded despite the months of sliding or stagnating prices, again with a long-term outlook. Mining is especially competitive now that more than 90% of all BTC have been created. New BTC are especially important as some of the coins may never be available for spending. 

Mining difficulty is at an all-time high, but the discovery of blocks is also more efficient with new types of mining equipment, which is also more energy-efficient. 

The Bitcoin network has 15,158 nodes, up from around 14,000 months ago, showing growing adoption and potentially higher network security.

Are Crypto Markets Becoming Boring Again

The BTC market now faces varied forces, including some doubts and fears surrounding a potential Russian military action in the Ukraine. The coming week also coincides with the US SuperBowl season, with the potential for lower trading activity. 

BTC volatility is relatively high at 3.5%, potentially leading to volatile periods. Some predictions see the coming week as holding surprises.

Neutral trading sentiment can also keep BTC in a range, as it has done in the past. The fear of another sudden drop is not entirely dismissed. 

The direction of BTC now hinges on the accumulation of leveraged positions which can be attacked. Currently, there is still a drive to try to short BTC, with some expectations of another dip closer to $30,000. However, the conditions may also create a short squeeze with an upward price move.

Only days ago short liquidations were attacked and reached an all-time high on the Binance BTC futures exchange. The liquidation of leveraged positions was one of the drivers for the downward price move, when longs lost positions. Now, there is an expectation for attacking short positions in conditions of low trading volumes.ย 

Dogecoin (DOGE) Takeoff Shows Optimism

DOGE was one of the movers among altcoins. The asset is often seen as a harbinger of rallies for altcoins. DOGE recovered to $0.15, spilling over interest into Shiba Inu (SHIB). The token-based on the doge meme moved up to $0.00003052, up 4% on the day and 14% in a week.

Later, those two assets got a setback, and most altcoins opened the new week with new losses.

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