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Record hashrate, investment growth, and falling volatility: why is January the perfect time to start a bullish Bitcoin rally?

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Relevance up to 15:00 2022-01-04 UTC+00

Throughout December 2021, the cryptocurrency market was dominated by sellers who successfully pushed the price to local lows and held key resistance levels. However, already in January 2022, the boring dynamics of the BTC price may be interrupted. In addition to the positive news background, this is indicated by several fundamental factors that accompanied the bitcoin during each bullish rally.

The bulls are waking up

Unfortunately, nothing lasts forever and New Year’s holidays too. Investors finish the festive festivities and return to the market. This will lead to the activation of buyers and, accordingly, an increase in the chances of upward momentum. As of 16:00, the total BTC trading volumes have returned to an average of $35 billion. I consider this a key factor since the main problem of cryptocurrency in the second half of December was the lack of large purchase volumes. Thanks to this, the bears easily managed to hold key positions. However, it is important to note that sellers began to lose ground in mid-December, but due to the weakness of buyers, this was not obvious. A new signal to intercept the initiative by the bulls was the formation of a pattern of “bullish absorption” for January 1-2. This indicates a gradual increase in the volume of purchases and the near future it is worth waiting for the development of this trend.

Falling volatility

One of the reasons why Bitcoin failed to resume growth at the end of December was the growth of the volatility index. According to the chart, the level of BTC volatility was within the downward trend, but a sharp impulse drop occurred on January 1. This is due to the completion of the fulfillment of obligations under fixed-term contracts, as well as profit-taking at the end of the year. In a sense, the market has cleared, volatility has fallen, and this can be considered another argument for the entry of particularly cautious investors.

ATH hashrate Bitcoin

Each bullish rally of Bitcoin to new highs was accompanied by an increase in the hashrate of the asset. As of January 1, the difficulty of mining BTC reached an absolute maximum set in April 2021. As of December 3, the indicator has decreased but is near the ATH mark. Reaching the absolute maximum is a bullish signal and eliminates the possibility of technical failures in the asset network. In this regard, it should also be noted the restoration of the number of unique addresses in contact with the Bitcoin network. The indicator stopped at around 500 thousand, but there is a positive trend, and by mid-January, the number of addresses may resume an upward movement.

January – Historically bullish

January has become a bullish month for Bitcoin in 2020 and 2021. The positive dynamics are visible, and for its final consolidation as an argument of technical analysis, Bitcoin should end January 2022 above $48k. The confident accumulation period and the growth of the onchain and hashrate indicate that the final word in the current bull market has not yet been said.

Meanwhile, Bitcoin is trading within a narrow range of $46k-$48k. There are no cardinal changes in the price movement, and sellers continue to dominate the market. This dominance is mainly reflected in the 7% drop in BTC/USD in 7 days. The situation remains unsafe for opening longs, even despite the decrease in volatility. A safe strategy now will be to transfer part of the funds to stablecoins and wait for the price to fall into the range of $42k-$45k or consolidate Bitcoin above $52k. The main reason for cautious movements in the bitcoin market is the lack of large active buyers.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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