2 Key Bitcoin Price Metrics Suggest BTC Is Ready to Reclaim $40,000

Cryptocurrencies had a volatile week after Bitcoin ( BTC ) sudden crash to $33,000 on January 24. However, the sharp 9% drop fully recov...

Cryptocurrencies had a volatile week after Bitcoin (BTC) sudden crash to $33,000 on January 24. However, the sharp 9% drop fully recovered within 8 hours after BTC price regained the $36,000 support.

On January 26, Bitcoin bounced back to $38,960 but it couldn’t hold the level and corrected 8.8% in the following 8 hours. Considering recent highs and lows, Bitcoin has only managed to gain a measly 1.6% over the past seven days.

Even with the considerable price swings, overall futures liquidations have been relatively small. The longs (buyers) had $570 million in futures terminated, while the shorts (sellers) faced $690 million. The data shows that Bitcoin futures accounted for 41% of the total liquidations of $1.25 billion.

Regulatory Winds Could Limit BTC Price Recovery

The total crypto market cap showed a modest weekly increase of 1.6%, in line with Bitcoin’s performance.

Total crypto market capitalization, billion USD. Source: Trading View

Notice how the January 24 price is forming higher lows and is currently showing support at $1.75 trillion. Even with a 22% decline in price in 2022, the total crypto market capitalization has seen a healthy rebound of 12.5% ​​since the January 24 low.

Investors appear to be digesting this week’s regulatory news where US Congressman Ted Budd submitted an amendment seeking to remove a provision from the bill allowing the The US Treasury will unilaterally ban certain financial transactions without public contribution.

If passed in its current form, the America COMPETES Act of 2022 would be a serious blow to the cryptocurrency industry, as Coin Center Executive Director Jerry Brito has said.

Investors have been negatively affected by the news that the US White House is preparing a crypto executive order requiring government agencies to perform risk analysis on cryptocurrency as a threat to national security.

Metaverse tokens decoupled after last week’s Apple news

A steady bearish news stream may have been the cause of recent cryptocurrency price action, but Metaverse tokens have been performing exceptionally well.

Top weekly gainers and losers as of January 31. Source: Nomics

Apple (AAPL) CEO Tim Cook said on a Jan. 27 investor call that metaverse apps have a lot of potential and his company is investing in augmented reality developments on its devices.

The news was enough to catapult metaverse-linked tokens including Flow, The Sandbox (SAND), Decentraland (MANA), Enjin Coin (ENJ), and Arweare (AR) up 36%.

On the other hand, Terra (LUNA) was impacted after Avalanche-based reserve currency Wonderland Money (TIME) announced that a pending proposal would determine whether the project should go out of business or not. As a result, the MIM stablecoin fell below 1.00 and some believe this may have had a ripple effect on Terra’s LUNA and UST tokens.

Scalability and interoperability blockchain solutions Cosmos (ATOM), Fantom (FTM), and Harmony (ONE) showed negative performance after Ethereum hash rate surpassed 1.11 PH/s, its all-time high never recorded. A higher hash rate indicates that more miners are joining the network, which helps strengthen the security of the blockchain.

Tether Premium and CME futures have improved

The OKEx attachment (USDT) premium measures the difference between peer-to-peer (P2P) transactions based in China and the official US dollar. Figures above 100% indicate excessive demand for cryptocurrency investment. On the other hand, a 5% discount usually indicates strong sales activity.

Peer-to-peer premium OKEx USDT against USD. Source: OKX

The Tether indicator has continued to show strength as it has settled above 99% for the past seven days. This is in stark contrast to three weeks ago, when panic selling by China-based traders drove the indicator to a 4% discount.

To confirm that the structure of the crypto market has improved, traders should analyze the CME Bitcoin futures premium. This metric analyzes the difference between the longer term futures and the current spot price in the regular markets.

Whenever this indicator fades or turns negative (reverse), it suggests that there is bearish sentiment.

2-month futures contract premium BTC CME against Bitcoin/USD. Source: Trading View

These fixed-month contracts typically trade at a slight premium, indicating that sellers are asking for more money to hold settlements longer. As a result, futures should trade at a premium of 0.5% to 2% in healthy markets, a situation known as contango.

Notice how the indicator flirted with the pullback from January 18-24 as Bitcoin fell below $42,000. However, as BTC showed signals that $33,000 could have been a local low, futures markets recouped a healthy 0.5% premium.

Considering that the overall cryptocurrency market capitalization is down 22% in 2022, the market structure looks set for a recovery.

Barring a significant shift in these fundamentals, Bitcoin bulls are likely starting to feel comfortable adding positions below $40,000.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.