Market forecast: Bitcoin breaks out of 3-day range—what to expect in February?

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as always, the market newsletter is split into two parts: Bitcoin outlook by Joseph and on-chain analysis by Cole.

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Tl;dr

Sentiment check: Cautiously positive.

Positives: High stablecoin inflow, large Coinbase outflows, low HODLer volume.

Negatives: February historically bearish for Bitcoin, continuous rejection of $38k, low Coinbase premium

  • February has historically been a weak month for Bitcoin.

  • Bitcoin broke out of a 3-day range, rising above $35,000.

  • There was a massive outflow from Coinbase, indicating a high-net-worth investor bought.

  • Some say this is likely Guggenheim, the $270 billion investment firm.

  • Miners have been selling a lot of Bitcoin, putting significant selling pressure on Bitcoin.

  • Stablecoin inflows are high, and this could combat the February weakness for Bitcoin.

  • Whale clusters are concentrated at $33,553. This level has to act as support for Bitcoin to move higher.

  • The main resistance level is still $38,000.


The Bitcoin Outlook by Joseph Young

Historically, February has been a weak month for Bitcoin.

Why is February normally short-term bearish for Bitcoin? I share the sentiment of Real Vision Group CEO Raoul Pal and his “headfake” theory.

Hedge funds and investment firms start January fresh, with a clean slate.

As the year moves towards its first quarterly close in March, hedge funds like to take profit on their positions, record some decent profit on their books.

By this time, the market is overcrowded with longs and buyers, causing a swift correction.

Do I expect a corrective month in February?

Not really. It could be a slow grind up, but nothing stands out as necessarily bearish.

The derivatives market is less crowded, the SOPR indicator is near zero, which means unrealized profit is low, big buyers in the U.S. are accumulating Bitcoin, and hedge funds are showing interest in Bitcoin.

I believe three things could offset a bearish February for Bitcoin. First, large inflows into Grayscale. Second, large outflows from Coinbase. Third, large stablecoin inflows into exchanges.

You can keep track of these data points here:

Grayscale inflows: bybt.com/grayscale
Coinbase outflows: CryptoQuant.com
Stablecoin inflows: CryptoQuant.com

Technical levels

In the short term, exchange heatmap of the Binance orderbook (Bitcoin-to-tether) show $35.9k and $37k as major resistance levels, before the obvious $38k resistance.

Source: Firechart, Material indicators

Based on whale clusters, which form when whales buy Bitcoin at a certain price level, the key support areas are $33.5k and $34,000.

Source: Whalemap

Key levels:

Resistance: $35.9k, $37k, and $38k
Support: $33.5k and $34k

On-chain indicators

On-chain data overall paint a positive picture for Bitcoin.

Historically, when Bitcoin topped out, large HODLer volume was spotted.

This trend often occurs because long-time holders move to sell Bitcoin, causing the selling pressure to increase significantly in a short period.

Source: Whalemap

For now, the HODLer volume is not as high as the 2017 peak or the 2019 peak.

Then, we have stablecoin inflows.

Stablecoin inflows are highly important because they show sidelined capital is entering back into the Bitcoin market.

Since January 24, stablecoin inflows into exchanges have been increasing.

This coincides with the recovery of Bitcoin from sub-$30,000 to over $35,000.

Source: CryptoQuant

So there we have it. I think February is a decent month for Bitcoin.