Bitcoin’s price recovery in 2023 has witnessed minimal institutional buying, casting doubt on whether BTC will rally beyond $25,000.
Bitcoin (BTC) shows the potential of stretching its ongoing price recovery to $25,000 by March, based on a mix of bullish technical and macro indicators.
Bitcoin price exits descending channel range
First, Bitcoin’s potential to hit $25,000 comes from its exit from a prevailing descending channel range.
A bull run or bull trap?
— Cointelegraph (@Cointelegraph) January 16, 2023
Notably, the BTC price broke out of the range late last week while accompanying a rise in its trading volumes. The cryptocurrency’s move upside also pushed the price above its resistance confluence, comprising a psychological price ceiling of $20,000 and its 20-week exponential moving average (20-week EMA; the green wave) near $19,500, as shown below.
BTC/USD 1-week candle chart (Coinbase). Source: TradingView.com
Breaking three resistance levels with strong volumes shows traders’ conviction about an extended price rally. Should it happen, Bitcoin’s next upside target appears at its 200-week EMA (the yellow wave) at around $25,000 — a 20% rise from current price levels.
Dollar forms a “death cross”
Bitcoin’s bullish technical outlook appears against the backdrop of a relatively weaker U.S. dollar, down due to expectations that the Federal Reserve will stop raising interest rates over lowering inflation.
The two assets have moved inversely to each another mostly since March 2020. As of Jan. 16, the daily correlation coefficient between Bitcoin and the U.S. dollar index (DXY), a barometer to gauge the greenback’s strength versus top rivaling currencies, was -0.83, according to TradingView.
BTC/USD and DXY correlation coefficient. Source: TradingView
A traditional technical setup sees more losses for the dollar ahead.
Dubbed the “death cross,” the setup appears when an asset’s 50-period moving average crosses below its 200-period moving average. For the dollar, the death cross shows its weakening momentum, meaning its short-term trend has been underperforming its long-term direction.
DXY daily price chart. Source: TradingView
“Expecting more downside in the mid to long term,” independent market analyst Crypto Ed said about the dollar, adding:
“Risk on assets should bounce more on that. Or better said: I expect BTC to break its bearish cycle as the big run in DXY is finito.”
Not a long-term Bitcoin price rally
Bitcoin has risen 30% above $20,000 in 2023 so far. But on-chain data shows that the buying trend lacks support from institutional investors.
For instance, the total amount of Bitcoin held by digital assets holdings such as trusts, ETFs, and funds has been declining during the coin’s price increase in recent months, according to CryptoQuant’s Fund Holdings index.
Bitcoin fund holdings. Source: CryptoQuant
In addition, no unusual transactions occurred on-chain but on crypto exchanges, per the comparisons made between CryptoQuant’s Token Transferred and Fund Flow Ratio metrics.
BTC/USD versus Token Transferred (orange) and Fund Flow Ratio (blue). Source: CryptoQuant
The Token Transferred metric shows the number of coins transferred in a specific timeframe. While the Fund Flow Ratio represents the ratio of coin transfers involving the exchange to the overall coin transfers network-wide.
“Usually at the bottom, institutional investors want to buy quietly through OTC trading,” noted market analyst MAC_D, adding:
“This trading was simply actively traded only on the exchange, and no unusual transactions occurred on the on-chain […] The current institutional investors have remained calm and just watching. OTC trading will be brisk when they expect a full-fledged uptrend turn.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.