'CDD' peaking suggests Bitcoin price bottoming out? 5 Things to Watch About Bitcoin This Week

Bitcoin traded lower heading into the final week of February but is showing signs of strength as it holds key support levels.

BTC/USD traded below $40,000 after a tense few days in macro and crypto markets, but there are already signs that a comeback could be the right direction to start the week.

Things are far from easy - concerns about inflation, U.S. monetary policy and geopolitical tensions are all at play, and with that comes the potential for continued setbacks for stocks.

Further hints from the Fed will be a hot topic in the short term, with March expected to be the time for the first key rate hike to be announced and implemented.

Could all this be overkill for a bitcoin that is technically stronger than ever?

With dark clouds still hanging over the global economy, Cointelegraph presents five factors that could influence price action in the coming days.

Stocks lead bleak macro week

The main stories for bitcoin traders this week are from the outside - the post-coronavirus economic outlook and concerns about Ukraine​'s relations with Russia.

The first is how the Fed will respond to soaring inflation, and more specifically, whether its signaled rate hikes will start in March as expected.

A rate hike is bad news for a booming stock market. Stocks have rallied for two straight years as the Federal Reserve unleashes a massive liquidity program to combat the demons of the coronavirus era: lockdowns and unprecedented controls on economic activity.

Everyone may face a reality check as the "cheap money" soon begins to dry up.

When it comes to raising interest rates, too much too soon risks recession - a topic already under discussion, a potential "inevitable disaster" for other countries - and conversely, raising rates Too little may fail to bring down the highest inflation rate in 40 years.

Meanwhile, the situation in Russia and its so-called plans for Ukraine further worried the stock market.

Conversely, commodities such as oil have been benefiting from fears of all-out war, but these fears are currently misplaced due to the slow pace of diplomacy this week.

Overall, however, there is considerable uncertainty about the short-term outlook, while optimism for a recovery in risk assets such as cryptocurrencies and traditional stocks by the end of 2022 remains.

However, numbers cannot be hidden.

Market commentator Holger Zschaepitz summed it up on Sunday: “Global equities have lost another $1.3 trillion this week amid heightened Russia/Ukraine risks and the possibility that the Fed will continue to raise interest rates this year.”

"The stock market is now worth $114 trillion, equivalent to 134% of global GDP."

S&P 500 1-day candlestick chart Source: TradingView

Wall Street trading will begin on Tuesday due to a U.S. public holiday.

BTC Price Targets CME Futures Gap

So, it's been a rough month for the average bitcoin day trader.

February saw only about two weeks of easy gains, with macro influences bringing the previous week's extravaganza to an end.

Since then, BTC/USD has lost support at $40,000 and is at risk of a full retracement of ground newly won this month.

However, $38,000 - previously highlighted as a level that bulls must hold - remains unchanged.

The week ended the week at its lowest in several weeks, but on the 4-hour chart, the relative strength index (RSI) broke out again, a classic signal before a short-term price rally.

As usual, Bitcoin then edged higher, remaining at $39,200 as of this writing.

Weekends for BTC/USD tend to be overlooked by seasoned traders as lack of volume can exacerbate any given volatility. Therefore, the drop to $38,000 may itself be an exaggeration of market sentiment.

What's more, the rally has a clear target - $40,000 as a support/resistance reversal, but also Friday's CME futures close of $39,860, which is above the bulk of the decline seen on Saturday.

Bitcoin has a habit of filling these “gaps” on the CME chart once a new week of trading begins, often within days or even hours.

CME Bitcoin Futures 1-Hour Candle Chart Source: TradingView

Who is buying and you are selling?

Incredibly, some are opting to sell their bitcoin now after months of decline, but data shows that the big players are smelling cheap.

Some of the biggest bitcoin wallets are betting big — and are doing so in 2022 and beyond.

There are many examples of this, with on-chain monitoring resource BitInfoCharts showing a trend of "accumulation only" of one entity in particular.

Its balance increased by 150 BTC on Monday alone, and it wasn’t alone — other addresses were also buying Bitcoin during the weekend lows.

Still, small holders are not necessarily bearish. New data from on-chain analytics firm Glassnode shows that the number of wallets holding at least 0.01 BTC ($393) is now at an all-time high of 9.4 million.

Bitcoin addresses with a balance of 0.01 BTC or more Source: Glassnode/Twitter

In fact, the last peak was in late January, before Bitcoin’s most recent rally to $45,500.

As Cointelegraph further reported over the weekend, the Bitcoin supply as a whole is becoming increasingly illiquid, with the percentage that has been dormant for at least a year approaching all-time highs.

CDD hints at possible bottom

Those looking for signs that $38,000 is a bottom really don't have to look far.

Thanks to on-chain data analysis, it can now be seen that long-term Bitcoin investors repeated the behavior that accompanied the July 2021 and September 2021 BTC price bottoms over the weekend.

The data set this time comes from CryptoQuant, which manages “Destroyed Bitcoin Days Dormant” (CDD) — the cumulative number of days since each BTC was last moved on a given day.

Over the weekend, a large amount of "old" Bitcoin was moving, thus "destroying" the largest number of days of dormancy since the July 2021 bottom below $30,000.

In terms of raw data, the CDD is the highest since July 2019 - although it was accompanied by a local top, not a bottom.

CDD Chart Source: CryptoQuant

'Extreme Fear' is back

With all these influencing factors in mind, it’s no surprise that crypto market participants don’t know what to think about the outlook.

The Crypto Fear and Greed Index, a popular sentiment indicator that attempts to quantify market sentiment, also appears to agree with this.

Overall sentiment has been shifting towards the “Extreme Fear” zone as Bitcoin rebounds below $40,000, even re-entering it as Bitcoin spot price action actually moves higher.

As of Monday, it stood at 25/100, possibly the "highest" extreme fear reading, but more than 50% below the "neutral" level four days earlier.

This year, the Fear & Greed Index has fallen much deeper, with a notable reversal in January near its all-time low of 9/100.

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.