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Bitcoin (BTC) is rapidly regaining its lost dominance in the crypto market so far into 2023.
On Jan. 30, Bitcoin accounted for 44.82% of the total crypto market capitalization, the highest since June 2022. In September 2022, Bitcoin's dominance index was as low as 38.84%.
The index typically rises when most crypto investors reduce their exposure to smaller tokens and seek safety in Bitcoin. The reasons include Bitcoin's better liquidity and lower volatility than alternative cryptocurrencies, or altcoins, primarily in a bear market.
Bitcoin's market dominance to grow further?
As of Jan. 31, Bitcoin is up 38% year-to-date (YTD) at around $23,000. In comparison, the second-largest cryptocurrency, Ether (ETH), gained 30% in the same period, showing most investors remain gravitated toward Bitcoin so far in 2023.
From a technical perspective, the Bitcoin dominance index may rise further in the coming weeks as it reclaims its 50-week exponential moving average (the red wave in the chart below) as support.
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Bitcoin (BTC) swapped bullish gains for chop into Jan. 31 as the end of the month saw nervous price action.BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
$46 million of longs liquidated
A rebound saw the pair flip $23,000 to short-term resistance, and was still trading below that level at the time of writing.
The stakes remained high for traders, long and short, with the monthly close just hours away. This was followed by interest rate decisions from the United States Federal Reserve on Feb. 1, along with the European Central Bank a day later.
With volatility likely lying in wait, liquidations mounted despite Bitcoin maintaining a fairly narrow trading range.
Bitcoin mining stocks usually follow BTC’s price because it directly influences the company's earnings. These stocks were beaten down heavily in the last quarter of 2022, especially in the month of December. The downturn after FTX's collapse worsened with the bankruptcy filings of the largest U.S.-based Bitcoin mining company, Core Scientific.
During this time, other mining stocks, like Marathon Digital Holdings (MARA) in the chart below, exhibited a weak correlation with Bitcoin’s price, suggesting that December’s downturn was probably overblown.MARA/USD price chart with MARA-BTC Correlation Coefficient index. Source: TradingView
The negative trend reversed at the start of 2023 as most mining stocks posted impressive gains. The Hashrate Index mining stock index, which tracks the average price of publicly listed mining and hardware manufacturing companies, increased by 62.5% year-to-date. The positive price spike also restored the strong correlation between BTC price and mining stocks.
However, the mining industry remains under stress, with low-profit levels expected for prolonged periods. Since Q2 2022, mining companies have funded operations selling BTC from reserves, selling newly mined BTC, raising debt and issuing new shares. Unless Bitcoin’s price consolidates above $25,000, the industry will likely witness a few takeover attempts or further treasury sales to pay off debt.
Some mining companies are operating at a loss
Currently, the top mining companies' price-to-earnings (PE) ratio is negative, suggesting that they're operating at a net loss, making their stock prices vulnerable to steep downturns.
According to CoinShares, digital asset investment products saw $117 million in inflows last week.
Bitcoin (BTC) struggled to maintain bullish momentum on Jan. 30 as the countdown to the monthly close kept the market nervous.BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
BTC price sees flash dip below $23,000
These, while Bitcoin’s best performance for nearly six months, encountered problems with staying power as the week began, with pre-Wall Street trading seeing a brief trip below $23,000.
At the time of writing, Bitcoin traded at around $23,250 as United States equities limped into the final few days of January.
Among the topics of interest for analysts was the CME Bitcoin futures gap from the weekend getting swiftly “filled” by spot.
Bitcoin (BTC) starts a key week with a familiar cocktail of price spikes mixed with fear that the bear market will return.
After sealing its highest weekly close in almost six months, BTC/USD remains over 40% up year-to-date, with the monthly close just 48 hours away — can the gains hold?
Against all odds, Bitcoin has rallied beyond expectations this month, making January 2023 its best in a decade.
Throughout, concerns have called for an imminent comedown and even new macro BTC price lows as disbelief swept the market.
That grim turnaround has yet to come to fruition and the coming days could yet turn out to be a crucial period for Bitcoin’s long-term trend.
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Bitcoin (BTC) has rallied nearly 40% so far in January, which is the best start to the year since 2013. The sharp up-move has turned several on-chain signals bullish, according to on-chain analyst Cole Garner.
Usually, a sharp recovery from the market lows, driven by the leader, is a sign that strong hands may be buying aggressively. That could be because traders believe the selling may have been overdone in the near term or they found the valuation to be attractive.Crypto market data daily view. Source: Coin360
After the initial runup, a swift correction could be expected, which will shake out the weak hands. The next fall will also confirm whether Bitcoin has formed a bottom or not. If the low is confirmed, several altcoins may start to outperform Bitcoin in the near term.
Which altcoins are showing promise in the near term? Let’s study the charts of Bitcoin and select altcoins to see which could extend their up-move in the next few days.
Bitcoin has been trading above $22,800 since Jan. 25, which suggests that bulls are trying to flip the level into support.
Bitcoin (BTC) spiked into key liquidity for a third time into Jan. 29 as the weekly and monthly closes loomed.BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
Trader on Bitcoin: $25,000 "in sight"
The move, although short lived, marked the pair's third such attempt to take sell-side liquidity above $23,400 in recent days.
In each instance, bulls appeared to lack momentum to reclaim new support levels, and at the time of writing, the status quo remained the same, with Bitcoin trading just below liquidity at $23,250.BTC/USD order book data (Binance). Source: Material Indicators/ Twitter
Previous order book data from Binance uploaded to Twitter by monitoring resource Material Indicators demonstrated the firepower needed to neutralize bears.
Aronow said he will still be contributing as a board member and strategic advisor. However, his priority will be to get the best medical treatment he can to make a full recovery.
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While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.
“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.
Bitcoin (BTC) remains firmly “bullish” at $23,000, according to new on-chain metrics from one of the industry’s best-known names.
In a preview on Jan. 28, market cyclist and on-chain analyst Cole Garner revealed what he said were “backtested and validated” Bitcoin trading tools.
Garner: BTC price signals should excite bulls
While BTC/USD attempts to push through liquidity above $23,000, the debate rages as to whether a significant BTC price correction is due.
For Garner, who offered a snapshot of several trading signals to Twitter users at the weekend, there is no doubt — the picture is firmly green.
“They are looking so bullish right now,” he summarized in part of accompanying commentary.