With few silver linings available for the bulls, lower weekend volume was poised to deliver some classic erratic moves after Bitcoin lost $40,000 support on Jan. 21.
While some, including El Salvador, made the most of new lower levels, others voiced concern that despite the drop, pressure still remained on bulls.
“Crazy part is open interest still hasn't flushed,” trader and analyst William Clemente summarized, one of many market participants noting that derivatives traders are still attempting to fight the trend.
“After all this carnage and absolute state of panic funding somehow isn‘t giga negative, futs aren‘t backwarded and OI barely went down. Interesting times. And with ‘interesting’ I mean poverty,” popular Twitter account Byzantine General additionally quipped.
Equities markets had taken a hit towards the end of the week, with tech stocks particularly in the line of fire and crypto once again showing the extent of its positive correlation.
Bitcoin (BTC) may have tanked to six-month lows this week, but under the hood, the network is now verifiably stronger than ever. Data from on-chain monitoring resources including Glassnode and BTC.com confirms that as of Friday, the Bitcoin network difficulty is at a new all-time high.
The difficulty, which expresses how much miners need to work to solve the equations to process transactions on the blockchain, is arguably the most important of fundamental Bitcoin network components.
The metric automatically adjusts to increase or decrease mining effort according to miner participation — the more competition among miners, the higher the difficulty.
This has the effect of keeping mining stable regardless of factors such as sentiment, price or unintended incidents. After dipping in mid-2021, difficulty took the rest of the year to bounce back, with the latest automated readjustment adding 9.32% to the previous level. With that, it entered unexplored territory above 26 trillion.
Commenting on the event, cryptocurrency journalist and commentator Colin Wu noted that the increase is the highest in over half a year, with BTC.com data confirming that late August saw the last adjustment of more than 10%.
Bitcoin (BTC) formed a trading pattern on Jan. 8 that is widely watched by traditional chartists for its ability to anticipate further losses.
In detail, the cryptocurrency's 50-day exponential moving average (50-day EMA) fell below its 200-day exponential moving average (200-day EMA), forming a so-called “death cross.” The pattern appeared as Bitcoin underwent a rough ride in the previous two months, falling over 40% from its record high of $69,000.
Death cross history
Previous death crosses were insignificant to Bitcoin over the past two years. For instance, a 50-200-day EMA bearish crossover in March 2020 appeared after the BTC price had fallen from nearly $9,000 to below $4,000, turning out to be lagging than predictive.
Additionally, its occurrence did little in preventing Bitcoin from rising to around $29,000 by the end of 2020, as shown in the chart below:
Similarly, a death cross appeared on the Bitcoin daily charts in July 2021 that — like in March 2020 — was more lagging and less predictive. Its occurrence did not lead to a massive selloff. Instead, BTC‘s price merely consolidated sideways before rallying to $69,000 by November 2021.
But, the bearish moving average crossovers in both the instances, as mentioned above, accompanied a piece of good news which may have limited their impact on the Bitcoin market.
This Daily Dose was brought to you by Cointelegraph.