Bitcoin price falters but fundamentals remain strong, suggesting a reversal may be on the cards

Posted: 24 January 2022 2:04 am
BTC 01-25 1800x1000

Bitcoin’s mining difficulty index is set to touch an all-time high over the coming week, indicating that network activity continues to rise.

  • Bitcoin’s market dominance is currently hovering just under the 40% mark.
  • Despite the current volatility, BTC’s open interest levels have remained largely stable.
  • El Salvador has added another 410 BTC to its crypto reserves as part of the ongoing marketwide crash.

Bitcoin (BTC) continues to face intense bearish pressure over the last 72 hours, especially after having stabilized around the $42,000 range for more than a fortnight. The digital currency is exhibiting weekly losses of over 17% and is trading at $36,963.

Independent crypto analyst Will Clemente noted that despite all the turbulence, Bitcoin’s open interest (OI) has barely flushed at all. The asset’s futures market has also held steady, suggesting that the currency’s fundamentals are still quite strong and that derivatives traders may be looking to flip the current volatility tide in the near future.

Another reason for investors to rest easy a little is that Bitcoin’s relative strength index (RSI) is currently hovering around levels witnessed back in March 2020. To elaborate, a reading of over 70 usually signals that an asset is “overbought” while anything under 30 is considered “oversold.” Bitcoin’s current reading of 20 indicates that it may be a victim of momentary panic selling, especially from younger, unseasoned investors.

The crypto industry is not the only sector on the receiving end of such negative monetary pressure as equities markets across the globe have also taken a massive nosedive — especially tech-related stocks especially — over the past weekend.

How to buy Bitcoin

El Salvador ignores market conditions and “buys the dip”

El Salvador, the Central American nation that recognized Bitcoin as legal tender last year, added another 410 Bitcoin to its coffers, President Nayib Bukele revealed yesterday. The acquisition was made at a price point of roughly $36,586 per token, a value that was last seen in July 2021.

President Bukele decided to adopt BTC during Q3 last year primarily to help combat the growing issue of inflation that his country has been suffering from over the last few years. Since the move, his government has accrued a total of 1,801 BTC.

Bitcoin network continues to become stronger

Amidst the ongoing marketwide crash, technical data made available by revealed that the Bitcoin network continues to grow from strength to strength over the past year. The project is set to attain a new all-time-high mining difficulty ratio of 26.643 trillion — with an average hash rate of 190.71 exahashes per second (EH/s) — over the coming fortnight, suggesting that BTC’s community support has not wavered at all.

In essence, the Bitcoin mining difficulty metric is one used to determine the overall computational power being used by the network at any given time. If the number is high, it suggests that the project is witnessing more transactions and mining-related operations.

Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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