Bitcoin saw little to no action for the first two days of 2023; the cryptocurrency will expect an increase in volatility, but in which direction? After months of downward pressure, there seems to be no room for further losses.
As of this writing, Bitcoin is trading at $16,700 with sideways movement for the past 24 hours. On higher timeframes, the price of BTC is seeing similar price movements. Other cryptocurrencies in the top 10 after market capitalization follow this development.
BTC price is moving sideways on the daily chart. Source: BTCUSDT trade view
Will history repeat itself for bitcoin? Maximum pain level
According to Reflexivity Research analyst Will Clement, the price of Bitcoin is approaching critical levels in its net realized gain and loss over market cap. This indicator measures the capital gain or loss for the cryptocurrency.
As seen in the chart below, the metric approaches absolute capitulation levels when the crypto market and its participants are at their lowest. The industry approached similar levels in 2018 when BTC plummeted from $20,000 Ethereum from $1,400.
In 2014 and 2015, the metric fell into this territory following the collapse of the world’s largest bitcoin exchange, Mt. Gox. Today, with the collapse of prominent crypto companies like FTX and Three Arrows Capital, the market is close to previous cycle lows.
Clemente said the following about this metric and how it affects the price of Bitcoin:
The capitulation, represented by net realized losses adjusted for market cap, is on par with any previous Bitcoin macro bottom. There is great pain in this market.
Based on this metric and past performance, BTC price could be close to the bottom. Source: Will Clemente via Twitter
January is the worst month to expect profits?
Despite the metrics and indicators pointing to extreme market sentiment and capitulation levels, the timing could remain unfavorable for Bitcoin. The cryptocurrency could see more sideways movement and additional losses until macroeconomic conditions change.
Additional data from a pseudonymous analyst indicates that January is historically a red month for the cryptocurrency. Over the past two years, returns for BTC in January have been a historic exception.
Since 2015, the cryptocurrency has been trading in the red in January, posting some of its worst losses. 2023 could see BTC returning to this momentum, but this period of losses could be preceded by two months of gains.
Monthly BTC performance since 2015. Source: DaanCrypto via Twitter
Bitcoin saw its best performance in February and March, as can be seen from the chart. These historic gains may finally coincide with extreme market sentiment and macro conditions.
Source: Crypto News Deutsch