(Kitco News) - Positive data showing that the U.S. economy ended 2023 on solid footing led to gains across the crypto and traditional markets on Friday as Bitcoin (BTC) continues to trade above $23,000 while the total crypto market cap now sits at $1.056 trillion.
The rally in the stock market reversed early losses, pushing the S&P, Dow and Nasdaq into the green for the day and ultimately closing up 0.57%, 0.32% and 1.15%, respectively.
Data provided by TradingView shows that an early morning attempt by Bitcoin bears to hammer its price lower was met with stiff resistance by bulls near $22,600, who managed to reverse the momentum and push BTC to a daily high of $23,507 in the afternoon before the top crypto settled back near support at $23,100.
BTC/USD 4-hour chart. Source: TradingView
The sideways price action for BTC over the past couple of days was addressed by Kitco senior technical analyst Jim Wyckoff in his morning Bitcoin update, writing that “prices are pausing late this week after earlier this week hitting a four-month high.”
According to Wyckoff, “This pause is not bearish and suggests the bulls are energizing for another push higher.” As it stands now, “BC bulls have the firm overall near-term technical advantage as a steep price uptrend is in place on the daily bar chart. That suggests more price upside is likely in the near term.”
Institutions are playing a key role in the Bitcoin rally
Marcus Thielen, the Head of Research at the crypto investment and lending firm Matrixport, noted in his most recent Daily Insights report that institutions appear to be playing a major role in the 40% rally that Bitcoin has experienced so far in 2023, saying that 35% out of that 40% occurred during U.S. trading hours.
“That's an 85% contribution of the rally associated with US based investors,” Thielen wrote. “Hence, we interpret this as a clear signal that US institutions are buyers of Bitcoin right now.”
And it's not just spot Bitcoin that institutions are buying, as Thielen is “also seeing consistently high premiums for perpetual futures.” This is a sign that traders are willing to overpay to get exposure, the report said. “We interpret this as an indication that faster institutional traders and hedge funds are actively buying the recent dip in crypto markets. This should be a very positive sign for Bitcoin. Institutional adoption continues.”
Thielen also pointed out that inflation data is expected to come in weaker for some time, which could lead to monthly rallies in the crypto market for the foreseeable future.
“This could set up the crypto market for a mid-month rally, every month and turn into a trend where we see a strong rally from mid-month onwards with some consolidation towards the end of the month as traders take profit and miners sell calls,” he wrote.
As for Friday’s price action in Bitcoin and what traders can expect moving forward, Eight Global founder Michaël van de Poppe posted the following tweet outlining what he expects in the near term.
Chop chop chop, that's what we see here.
— Michaël van de Poppe (@CryptoMichNL) January 27, 2023
Might be some distribution going on in which we'll drop south to test some levels and liquidity for #Bitcoin.
Break and flip $23.1K -> test at $24K.
Losing $22.3K -> $20K test. pic.twitter.com/f6TD7Zdecb
This was further validated by market analyst Rekt Capital, who posted the following tweet looking at the monthly chart for Bitcoin and suggested that it needs to close above $23,400 to ensure a greater chance of breaking out higher.
To ensure a higher chance of breakout, #BTC should ideally Monthly Close above the blue ~$23400 resistance
— Rekt Capital (@rektcapital) January 27, 2023
Otherwise, $BTC could set itself up for a dip inside this ~$20000-$23400 range (blue-blue) to consolidate here for a few weeks#Crypto #Bitcoin pic.twitter.com/W4IZjGNYUz
Altcoins continue to trend higher
On the whole, it was a positive day for the altcoin market, with more than 80% of the tokens in the top 200 seeing gains as the week comes to a close.
Daily cryptocurrency market performance. Source: Coin360
The biggest gainers include a 31.73% increase in the price of Magic (MAGIC), a 19.42% gain for LCX (LCX) and an 18.66% increase for Flux (FLUX).
The overall cryptocurrency market cap now stands at $1.056 trillion, and Bitcoin’s dominance rate is 42.2%.
