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BTC price double top forming? 5 things to know in Bitcoin this week

Thanks to oil production cuts and major historical resistance, among other factors, Bitcoin bulls have their work cut out to break higher.

Bitcoin (BTC) starts a new week in volatile territory, with news of an oil supply cut delivering a choppy start.

Still caught at major historical resistance, BTC/USD delivered an unappetizing weekly close on news of oil production cuts.

A subsequent rebound may show bulls’ mettle, but the question for analysts is what happens next. Will oil prices dictate market moves or can Bitcoin break through $30,000?

Under the hood, the picture is as rosy as ever, with network fundamentals due to hit new all-time highs this week while dormant supply is also increasing.

Cointelegraph looks at Bitcoin markets as the world digests the latest move from The Organization of the Petroleum Exporting Countries plus 10 other oil-exporting countries (Opec+).

Oil cut boosts dollar as inflation concerns return

A key event over the weekend, which is now upending macro conditions, is a decision to cut global oil output.

Opec+ has announced voluntary cuts in production totaling 1.65 million barrels per day, and the impact was felt immediately, with the U.S. dollar rising alongside energy costs.

A classic headwind for risk assets, including crypto, the U.S. Dollar Index (DXY) traded above 102.7 at the time of writing, up from April lows of 102.04.

“Eyes on DXY this morning…. This bounce could be just a gap fill as I spoke about last week. I was waiting for this fill,” popular trader Crypto Ed reacted, uploading an explanatory chart to Twitter.

“It’s time for DXY to show its direction (which should effect BTC’s PA).”

U.S. Dollar Index annotated chart. Source: Crypto Ed/ Twitter

While the Opec+ move took its toll on assets from Bitcoin to gold, Alasdair Macleod, head of research for Goldmoney, argued that governments would have to inject liquidity to offset any energy price rises, thus once again boosting risk-asset performance.

“Markets will soon react to the surprise OPEC production cut from this weekend,” financial commentary resource The Kobeissi Letter continued in its own dedicated analysis.

“Oil prices will likely rise back above $80.00, an unwelcomed development by central banks attempting to fight inflation. Supply-side inflation is set to worsen on this news.”

Higher inflation would, in turn, increase the odds of central banks continuing to hike interest rates despite the ongoing banking crisis in the U.S. and abroad.

According to the latest estimates from CME Group’s FedWatch Tool, markets currently believe that the Federal Reserve will hike rates by another 0.25% in May, having previously been more in favor of a pause.

Fed target rate probabilities chart. Source: CME Group

Bitcoin price rebounds from Opec+ news

Bitcoin initially felt the pressure from the Opec+ decision as the weekend faded, dropping below $28,000 to close the week in a disappointing style.

However, during the April 3 Asia trading session, BTC/USD staged a sudden comeback, jumping $865 from the overnight lows of $27,600 on Bitstamp.

Popular trading account Daan Crypto Trades noted that in so doing, Bitcoin had closed another CME futures gap and thus exhibited classic Monday trading behavior.

Fellow analytics account Skew followed short-term developments while predicting a “much bigger reaction” during the coming week.

Looking ahead, however, crypto analysis and education resource IncomeSharks maintained a bearish outlook on BTC.

“I just can’t unsee the double top Mcdonalds pattern,” it wrote on the day, referring to the structure of BTC/USD in 2023 so far.

“Now you got a diagonal trendline break, low volume, and weak OBV. Logic and unbiased emotions says to sell/short this, I don’t see a reason to be bullish short term YET.”

BTC/USD annotated chart. Source: IncomeSharks/ Twitter

Trader and analyst Rekt Capital was not so sure.

“Still not clear if BTC is forming the second part of its Double Top formation,” he argued in his latest analysis.

“$BTC would need to soon drop to ~$27,000 (blue) if it is to fully develop the pattern pattern & form an M-like shape. Lose ~$27K -> Double Top validated. Something to consider.”

BTC/USD annotated chart. Source: Rekt Capital/ Twitter

Another week, another Bitcoin mining record

Dip or no dip, Bitcoin network fundamentals are in no mood to flip bearish this week.

According to the latest estimates from BTC.com, Bitcoin difficulty is due to have yet another increase at the upcoming automated readjustment in three days.

This will take it to 47.92 trillion on a 2.3% rise, marking new all-time highs for difficulty.

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

Data from MiningPoolStats shows a similar uptrend for hash rate, which by some measurements touched a record 400 exahashes per second (EH/s) recently.

Analyzing what could be behind the rapid growth, Sam Wouters, a research analyst at mining firm River, suggested that it was likely sidelined rigs returning to operations thanks to price rises.

“It is rumored that several large public miners have significant inventories of unused ASICs. While Bitcoin’s price was so low and as much inventory as possible was brought online last year, at some point maximum capacity of what the network could handle was reached,” he wrote in part of a dedicated Twitter thread on March 27.

“Now that the price has been rising again and some time has passed, more of this inventory has been able to go online.”

Data from on-chain analytics firm Glassnode shows that miners have begun attempting to retain more BTC than they earn.

On a rolling 30-day basis, miners’ net position change is again positive after two weeks of a downtrend.

Bitcoin miner net position change chart. Source: Glassnode

Dormant BTC supply sets further records

Bitcoin is known for its ability to create supply shocks, but the latest data underscores the long-term trend.

Despite the BTC price comeback this year, the available supply dormant for a decade or more is at new all-time highs.

That record was beaten again this week, with 2,691,418.953 BTC not leaving wallets since at least April 2013.

This equates to 12.81% of the total possible supply of 21 million BTC, or 13.91% of the supply mined so far.

BTC supply last active 10 years ago or more. Source: Glassnode/ Twitter

Any mass interest in BTC will thus mean that buyers have a dwindling supply to purchase. While rising slightly in 2023, exchange balances remain near their lowest since early 2018, Glassnode confirms.

Bitcoin exchange balance chart. Source: Glassnode

“Too euphoric?”

Crypto market sentiment has not yet digested the possibility of a significant retracement.

Related: Bitcoin liquidity drops to 10-month low amid US bank run

According to the classic sentiment indicator, the Crypto Fear & Greed Index, “greed” is what continues to characterize the overall mood.

As of April 3, greed measured 63/100, near its highest since Bitcoin’s all-time highs in November 2021.

“The crypto market is getting too euphoric,” analytics resource Game of Trades warned late last month.

While high, the level of greed, as depicted by the Index, still has considerable room for growth until hitting “extreme” territory nearer 90 — this being a classic signal that a significant market correction is due.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Data shows pro Bitcoin traders want to feel bullish, but the rally to $23K wasn’t enough

Bitcoin price has flashed a few bullish signals, but traders are not too keen on adding leverage longs until after the Federal Reserve shows its cards on Feb. 1.

Bitcoin (BTC) price had a mixed reaction on Jan. 25 after the United States reported a 2.9% gross domestic product growth in the fourth quarter, slightly better than expected. Still, the sum of all goods and services commercialized between October and December grew less than 3.2% from the previous quarter.

Another data set limiting investors’ confidence was the likelihood that the U.S. Federal Reserve would not revert its contractive measures anytime soon after U.S. durable goods orders jumped 5.6% in December. The indicator came in much higher than anticipated, so it could potentially mean that interest rates will be increased for a little longer than expected.

Oil prices are also still a focus for investors, with West Texas Intermediate (WTI) approaching its highest level since mid-September, currently trading at $81.50. The underlying reason is the escalation of the Russia-Ukraine conflict after the U.S. and Germany decided on Dec. 25 to send battle tanks to Ukraine.

The United States Dollar Index (DXY), a measure of the dollar’s strength against a basket of top foreign currencies, sustained 102, near its lowest levels in eight months. This signals low confidence in the U.S. Federal Reserve’s ability to curb inflation without causing a significant recession.

Regulatory uncertainty could also have been vital in limiting Bitcoin’s upside. On Jan. 26, De Nederlandsche Bank, the Dutch central Bank, fined cryptocurrency exchange Coinbase $3.6 million due to non-compliance with local regulations for financial service providers.

Let’s look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.

Bitcoin margin longs slightly increase

Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

OKX stablecoin/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio slightly increased after Jan. 20, signaling that professional traders added leverage long after Bitcoin broke above the $21,500 resistance.

One might argue that the demand for borrowing stablecoins for bullish positioning is far less than levels seen earlier in January. However, a stablecoin/BTC margin lending ratio above 30 is unusual and typically excessively optimistic.

More importantly, the current metric at 17 favors stablecoin borrowing by a wide margin and it indicates that shorts are not confident about building bearish leveraged positions.

Options traders flirt with an optimistic bias

Traders should also analyze options markets to understand whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

Bitcoin 60-day options 25% delta skew: Source: Laevitas

The 25% delta skew flirted with the optimistic bias on Jan. 21 as the indicator reached the threshold at minus 10. The movement coincides with the 11.5% BTC price increase and its subsequent rejection at $23,375. From then on, options traders increased their risk aversion for unexpected price dumps.

Related: Here’s why Bitcoin price could correct after the US government resolves the debt limit impasse

Currently, near zero, the delta skew signals investors are pricing similar risks for the downside and the upside. So, from one side, the lack of demand from margin traders willing to short Bitcoin seems promising, but at the same time, options traders were not confident enough to become optimistic.

The longer Bitcoin remains above $22,500, the riskier it becomes for those betting on BTC price decline (shorts). Still, traditional markets continue to play an essential role in setting the trend, so the odds of another price pump ahead of the Fed’s decision on Feb. 1 are slim.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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.