Decentral Block Post

Bitcoin (BTC) rallied 11% between Jan. 20 and Jan. 21, reaching the $23,000 level and shattering bears' expectations for a pullback to $20,000. Even more notable is the move brought demand from Asia-based retail investors, according to data from a key stablecoin premium indicator.

Traders should note that the tech-heavy Nasdaq 100 index also gained 5.1% between Jan. 20 and Jan. 23, fueled by investors’ hope in China reopening for business after its COVID-19 lockdowns and weaker-than-expected economic data in the U.S. and the Eurozone.

Another bit of bullish information came on Jan. 20 after U.S. Federal Reserve Governor Christopher Waller reinforced the market expectation of a 25 basis point interest rate increase in February. A handful of heavyweight companies are expected to report their latest quarterly earnings this week to complete the puzzle, including Microsoft, IBM, Visa, Tesla and Mastercard.

In essence, the central bank is aiming for a “soft landing,“ or a controlled decline of the economy, with fewer job openings and less inflation. However, if companies struggle with their balance sheets due to the increased cost of capital, earnings tend to nosedive and ultimately layoffs will be much higher than anticipated.

On Jan. 23, on-chain analytics firm Glassnode pointed out that long-term Bitcoin investors held losing positions for over a year, so those are likely more resilient to future adverse price movements.

Bitcoin’s mining industry has been relatively stable compared to the bearish price action and the tumultuous fallout of exchanges and lending companies. 

The network’s hashrate dipped slightly toward the end of 2022, primarily due to an unprecedented blizzard in the U.S., and has since recovered strongly to surpass its previous peak above 270 EH/s. It was particularly encouraging to see that the hashrate holding well above summer 2022 lows, despite the aftermath of FTX collapse.

However, despite the recent robustness in a variety of metrics, the mining industry faces many challenges, which will likely restrict its growth moving forward. The hurdles include low profitability, a threat from new-age efficient machines and the upcoming Bitcoin halving which will slash block rewards by half.

BTC mining remains a stressed industry

While the hashrate of Bitcoin's network has improved, miners are still under a lot of stress due to low profitability. The earnings of Bitcoin miners have shrunk to one-third their value from the peak. Before the May 2022 price collapse, miners made more than $0.22 daily per TH/s, a figure which has now dropped to $0.07.

The percentage share of small-sized miners with breakeven prices above $25,000 has dropped from 80% in 2019 to 2% by 2022, which is a positive sign of an end to miner capitulation.

Bitcoin’s (BTC) price has risen about 37% year-to-date and is not showing any signs of slowing down. The S&P 500 index (SPX) has also made a winning start to the year but has seen a relatively muted rally of roughly 4%.

While the price of risky assets are rising, the United States dollar index (DXY), perceived as a safe haven, extended its downtrend and declined more than 1% in January.

The change in sentiment toward risky assets may have been triggered by expectations that the U.S. Federal Reserve could slow down its rate hikes as inflation cools off. Some analysts even expect the Fed to pivot and start cutting rates before the end of the year.

Several analysts remain skeptical about Bitcoin’s rally but the longer the price sustains above $20,000, the greater the possibility that the macro low may have been made in November. If the next decline forms a higher low, it could further confirm that the worst may be behind us.

Could the rally in Bitcoin and altcoins witness profit booking in the next few days? Let’s study the charts to find out.