Weekly BTC Technical Overview: Bitcoin Reconquers $42,000 - BTC Bulls Back in Play?

Over the last 24 hours, the global cryptocurrency market capitalization increased modestly to $1.9 trillion from $1.88 trillion. However, the trade volume fell to $71.88 billion from $91.22 billion. The total cryptocurrency market volume increased by more than 17% to $106.72 billion.

In the past 24 hours, decentralized finance (DeFi) contributed 15.01% of total Bitcoin trade volume, totaling $16.02 billion. On the other hand, Stable coins accounted for 81.34 percent of the crypto market's 24-hour volume of $86.81 billion.

In this update, we will focus on the financial markets fundamental analysis, technical analysis, and potential trading opportunities.

During the previous week, after a close above $38,500, the Bitcoin price started a significant push to the upside. The largest cryptocurrency by market cap gained bullish momentum and surpassed the $40,000 mark, as well as the 100 hourly simple moving average. Yesterday, BTC/USD closed at $43,423.9 after a high of $42,730.0 and a low of $41,171.0.

Bitcoin is now worth more than $42000, up more than 26% from its lows in late January. The BTC/USDT pair gradually rose and regained momentum over the weekend, reaching its highest level since January 20. The fundamental analysis is playing a major role in Bitcoin's uptrend.

Rafael Ted Cruz, a junior Republican senator from Texas, stated that he purchased between $15K and $50K worth of bitcoin when trading between $36K and $37K. Cruz has been a Bitcoin proponent and has accepted cryptocurrency payments at gift shops and vending machines throughout the United States Capitol complex.

Senator Cruz has also spoken out against a provision in the recent infrastructure bill that critics say would broaden the definition of a broker to include miners, validators, and coders. This is not the first time a member of Congress has revealed his cryptocurrency holdings.

Several members of Congress, including Democrats Marie Newman, Jake Auchinloss, Republicans Jeff Drew, and Barry Moore, have previously provided updates on their bitcoin holdings. Hence, that's one reason that's adding a buying trend in Bitcoin prices.

The Securities and Exchange Commission (SEC) of the United States has postponed its decision on whether to approve Grayscale's application for a Bitcoin (BTC) exchange-traded fund (ETF), citing familiar concerns about manipulation liquidity and transparency.

The regulator is concerned about how the digital asset manager intends to convert its Grayscale Bitcoin Trust into a spot ETF. The SEC was unconvinced that Grayscale's proposal was intended to prevent alleged fraud and manipulation in the Bitcoin market. This news kept the BTC/USD exchange rate under pressure for the rest of the day.

Bitcoin prices have risen as a result of El Salvador's optimization. It appears that El Salvador's president, Nayib Bukele, has ignored the International Monetary Fund's (IMF) request to revoke Bitcoin's legal tender status in the country. The IMF recently made this request, citing the consequences because they believe BTC is prone to high volatility and price swings. The IMF was also concerned about the country's ability to protect cryptocurrency traders and regulate cryptocurrency.

Nonetheless, despite the IMF's warnings and requests, the country stood firm and refused to abandon its plans. El Salvador's Treasury Minister, Alejandro Zelaya, stated that adopting bitcoin was a way for the country to become more independent and stand out in financial society. Nayib Bukele went on to say that countries are sovereign nations with the ability to make their own decisions. No international organization has the authority to compel them to do anything.

The uptrend in Bitcoin price can also be associated with a weaker US dollar. Nonfarm Payrolls (NFP) increased by 467K in January, exceeding the median forecast of 150K. This was a slight slowdown from the pace of job growth in December, when 503K jobs were added (revised up from 199K). The massive headline beat was driven by a 444K increase in private nonfarm payrolls (versus the expected 150K gain). Manufacturing payrolls increased by 13K versus the 25K forecast, which was slightly less than expected.

Average Hourly Earnings increased at a faster MoM rate of 0.7% in January, exceeding the expected 0.5% MoM gain. The unemployment rate unexpectedly increased slightly to 4.0% from 3.9% in December, contrary to expectations that it would remain unchanged.

The Reaction of the Market

Initially, the US dollar rocketed due to a much stronger-than-expected headline job gain, combined with unexpectedly high wage growth. However, the US dollar's uptrend was short-lived, and soon investors started pricing in the worse than the expected unemployment rate.

The DXY, which was trading around the 95.30 level before the data, has jumped to session highs above the 95.50 level, but it is still down about 1.7% on the week and track for its worst week since March 2020.

The Indian crypto community, waiting for years for clarity on how the government intends to tax these assets, finally got their wish this week. However, some of them now wish they hadn't. Finance Minister Nirmala Sitharaman announced in her budget speech on February 1 that India will tax all "virtual digital assets" at 30% – with no deductions or exemptions – beginning April 1.

The real killer blow, particularly for traders, is the 1% TDS (tax-deductible at source) that will be applied to every single crypto transaction.

Until now, standard income tax rules have been applied, with gains on cryptocurrency transactions falling under either 'business income' or 'capital gains,' counting on the nature of the transactions and the length of time they occurred. However, as of April 1, India will treat cryptocurrency income the same way it does lottery winnings, which are taxed at 31.2%.

That's pretty much it from the fundamental side, the technical indicators and chart patterns are pointing to an uptrend; let's take a quick look.

After a close above $38,500, the Bitcoin price began a significant rise and gained bullish momentum to surpass the $40,000 mark. Technical indicators are supporting an uptrend, therefore, the BTC/USDT coin broke through the $41,200 resistance level. It reached a high of $42,694 and is now consolidating gains. The price appears to be preparing for the next move, as it is trading well above the technical indicators like 50 and 100 hourly simple moving average.

Technical indicators like Fibonacci retracement and EMA are supporting an uptrend. On the hourly chart of the BTC/USDT pair, a key bullish trend line is forming with support near $41,600. The BTC/USD is trading well above the 23.6 percent Fib retracement level of the upward move from the swing low of $37,324 to the high of $42,694.

Bitcoin Price Chart on the Daily Timeframe | Source: BTC/USDT

Bitcoin's immediate resistance stays at $42,650 level, and the next resistance level is around $43,200. A clear upside break above the $43,200 resistance level could spark another increase. In the aforementioned scenario, the price could even test the $45,000 resistance level.

If Bitcoin does not begin a new upward trend above $42,650, it may experience a downward correction. On the downside, the immediate support sits near $41,600. The first significant support is seen near the $40,000 level. As Asian investors come back from their vacations, financial markets are returning to normalcy. Therefore, Bitcoin and altcoins may exhibit some price action during this week.

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