Buying Pressure in 'Bull Period' - 5 Things to Know About Bitcoin This Week

Bitcoin started the last week of March with a bang, back above its yearly opening price of $46,000.

Over the weekend, the upward momentum of BTC/USD was unexpectedly strong. It began to surge on Saturday and continued to challenge the highs of early 2022 in the evening.

In the current macro environment with considerable uncertainty, the strength of Bitcoin this month will naturally be dubious. The reaction is understandable, as previous attempts to break out of its multi-month trading range have failed.

Despite periods of volatility, bulls are always disappointed and Bitcoin then not only reverses, but often returns to the lower end of the range, costing bears and bulls alike.

Still, the hope is that this time will actually be different - analysts have long argued that only a break above the upper bound of the range (formed by a yearly open around $46,200) would be enough to spark a paradigm shift.

Now that this is reflected on the charts, attention is focused on the final hurdle - consolidating these multi-month resistance levels into support.

As the process unfolded on Monday, Cointelegraph focused on potential triggers that could make or break this important episode in Bitcoin’s price action.

Bitcoin erases 2022 losses

"Gradually and then suddenly" or purely by chance? Traders are still trying to make sense of bitcoin's newfound strength this week.

This is a sight not seen on the charts since the new year - BTC/USD is back at $47,000. After rallying nearly $3,000 in 24 hours, the biggest cryptocurrency has dealt a heavy blow to a resistance level that has kept bulls on the ground for months.

The significance of $46,000 has almost always been a hot topic, with many saying a return to the year open would be a signal that Bitcoin is ready to go after something bigger.

Few, however, expected this phenomenon to take place "overtime," and as the week began, as the rally itself began, social media was naturally rife with doubts about the true strength of the rally.

Still, more cautious voices no longer see the potential for further gains, even if longer-term forecasts remain to the downside.

Analyst and statistician Willy Woo reports: “Bitcoin’s fundamental buying pressure has now climbed into bullish territory.”

Another analyst, Matthew Hyland, is a major supporter of the view of $46,000. He also gave a target of $52,000 as the next resistance wall that needs to be broken.

Bitcoin has broken the $46,000 resistance zone

The next major resistance zone is around $52,000

— Matthew Hyland (@MatthewHyland_) March 28, 2022

He added in the tweet that this was preceded by a breakout in Bitcoin’s relative strength index (RSI), which itself is a classic signal of a trend breakout.

The RSI assesses how overbought or oversold an asset is at a particular price, and in the case of bitcoin, its score has been climbing from bottom levels since mid-January, according to data from Cointelegraph Markets Pro and TradingView.

Therefore, the further development of the RSI can determine the extent of the rally based on historical behavior norms.

BTC/USD 1-day candle chart (Bitstamp), including RSI data source: TradingView

Analyst Eyes Bitcoin Stock Decoupling

It's a confusing world, and it doesn't get any easier when it comes to what bitcoin should be doing.

The ongoing threat of inflation, war in Europe and a resurgence of the coronavirus -- to name just three major macro triggers -- has commentators predicting a bleak outlook for stocks and risk assets in 2022.

Just this month, multiple sources warned that Bitcoin could soon face Waterloo as a sharp sell-off in stocks triggers another March 2020 moment.

Some believe that the era of “easy money” following that event is over and that only with continued quantitative easing will Bitcoin enjoy the massive capital flows it did later that year.

But now, bitcoin appears to be setting itself apart, challenging its strong correlation with the stock market. Last week, the S&P 500 hit a 17-month high.

While the S&P has shrugged off the Russo-Ukraine war and the Fed's tightening program, analysis shows that the sell-off has been substantial and bears are everywhere - ironically, this is the start of a new "short squeeze" upside perfect fuel.

“The correlation between risk-on/risk-off and equities is a short-term effect. Bitcoin trading this correlation is due to short-term speculators,” Woo said in a recent tweet on the topic.

“Bitcoin internal demand fundamentals driven by adoption curve are stronger. Eventually, the market will decouple; last time in October 2020.”

If speculators have dominated so far this year, a return of interest in bitcoin futures could be a trigger to watch going forward. Open interest in bitcoin futures is now at its highest level since December, according to Coinglass.

Bitcoin futures open interest Source: Coinglass

Who wants to get their funds back?

There's another side to the $46,000 story that makes it more than just New Year's token levels.

As noted by on-chain analytics firm Glassnode over the weekend, the area around $45,900 is an area that has seen a lot of previous buyer activity.

Market entrants bought bitcoin on its decline from all-time highs, but since that puts a cap on bitcoin's 2022 trading range, bitcoin has since remained underwater.

Glassnode warned that a return could undermine sentiment as these buyers rush to exit.

“Bitcoin’s next major on-chain headwind is the short-term holder realized price, trading at $45,900. The metric is the average price paid for Bitcoin by investors who bought after the October high,” Friday , Glassnode explained next to a graph of its long- and short-term holders achieving cap metrics.

"Bearish resistance comes from short-term holders looking to 'get their money back.'"

So far, short-term holders — defined as entities that hold Bitcoin for less than 155 days — have not triggered a reversal in the trend. The start of trading on Wall Street could still bring surprises, though.

Mining difficulty should reach new highs in the next few days

This year, Bitcoin’s network fundamentals are sure not to disappoint.

The following week was no exception, with Bitcoin’s network difficulty climbing to an all-time high of 28.67 trillion.

However, the next automatic adjustment in difficulty will not only offset these losses, but will also add 4.4% to the existing one, making it harder than before.

Bitcoin 7-day average mining difficulty chart Source: Blockchain

The implication of the increased difficulty is basically that the competition for block subsidies for mining has never been more intense, as evidenced by Bitcoin’s equally bullish hashrate numbers.

In turn, Bitcoin becomes more resistant to network attacks as more miners devote more and more resources to competing for the same fixed reward, protecting network participants in the process.

A 50% drop in hashrate last year due to mining hits now appears to be but a distant memory.

The impact of "banning" Bitcoin mining. Bitcoin's computing power has reached a new high, higher than when the "ban" occurred.

— CZ Binance (@cz_binance) March 25, 2022

Meanwhile, the European Union attempted to ban proof-of-work cryptocurrency support, but failed to secure a second backing from lawmakers last week.

According to monitoring resource MiningPoolStats, known mining pools provide around 219 EH/s of computing power, which itself is the highest level ever recorded.

Greed returns for first time since $60K

Bearish at the bottom, bullish at resistance – this is a classic sentiment feature that plays out time and time again.

However, the Crypto Fear and Greed Index shows for the first time in 2022 just how bullish the sentiment of the average cryptocurrency investor is.

For the first time since Bitcoin’s latest all-time high of $69,000 in November, the classic sentiment indicator has entered “greed” territory.

Its transformation, like the mood of the month itself, is impressive. Just a week ago, it measured mood - not just "fear" but "extreme fear" - with a score of 22/100.

Now, that trend is heading in the opposite direction, and as long-term investors know, sustained rallies are often accompanied by a gradual uptick in market sentiment.

Today's Fear and Greed Index is sharply higher in BTC's action.

The last time it entered the greed zone, the price was $60,000+.

— Philip Swift (@PositiveCrypto) March 28, 2022

However, some of them are clearly still excited about what's coming next.

“Crypto markets were in a solid uptrend when the supply shock started. It only takes one bullish event to push the index back to all-time highs,” JRNY Crypto said on Sunday.

“Look how crazy things can get when people’s emotions go from fear to greed with limited supply.”

Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.