3 factors that could trigger Bitcoin’s next big move

At the time of writing, the world’s largest crypto is on course for best January since 2013, having notched a 38% gain since the end of 2022.

If so, that would only be bettered by the 51% advance from back in January 2013 and January 2011’s 73.33% surge – back in Bitcoin’s infancy.

 

Typically, Bitcoin gets off to a sluggish start to the year, before picking up momentum in the lead up to springtime.

Here’s a look at the average monthly gains for Bitcoin over the past 10 years:

1. January: 5.58%
    
2. February: 12.07%
    
3. March: 11.33%
    
4. April: 17.40%
    
5. May: 13.38%
    
6. June: 6.23%
    
7. July: 11.34%
    
8. August: 5.95%
    
9. September: -3.64%
    
10. October: 22.31%
     
11. November: 50.29%
     
12. December: 9.01%

(source: Bloomberg)

From the above, it appears that October and November tend to see higher monthly gains for Bitcoin.

 

But that’s a long time to wait for such seasonal factors to kick in.

For more immediate concern, here are three key factors that could greatly influence Bitcoin’s next move:

 

1. All eyes on the Fed decision due February 1^st.

This is the mother of all risk events this week, and may well set the tone for global financial markets for many weeks to come (or at least until the next Fed meeting in March).

Markets are hoping that the Fed can afford to be less aggressive with its rate hikes, seeing as inflation has moderated (from June’s 9.1% , down to December’s 6.5%).

Markets are fully expecting that the Fed will only hike by 25 basis points (bps) this week, which is just one-third the size of the 75bps hikes that the US central bank fired off at four consecutive policy meetings between June and November last year. In other words, markets hope that the largest chunks of the Fed rate hikes are now over.

However, if the Fed signals this week that there are more rate hikes in store and is set to send US interest rates above the market-forecasted peak of 5%, that could prompt Bitcoin and other risk assets to unwind some of their year-to-date gains.
 

 

2. Bitcoin on path towards “golden cross”

A “golden cross” is when an asset’s 50-day simple moving average (SMA) crosses above its 200-day SMA.

When these two widely-followed technical indicators cross paths, that typically sends a strong signal to traders (the opposite of a “golden cross” is labelled as a “death cross”).

As for a “golden cross”, its formation has typically preceded some astronomical gains for Bitcoin in recent years.

 

Look at this chart that shows Bitcoin prices since 2018.

Notice how a “golden cross” (golden circles) is often accompanied by skyrocketing surge in Bitcoin prices (measured in the green vertical arrows).

However, the eagle-eyed reader would spot the “false” golden cross that formed in early 2020, where the 50-day SMA crossed above its 200-day counterpart, only for that formation to prove fleeting as prices tumbled into sub-$4k levels at the trough.

In other words, a “golden cross” is no guarantee for future Bitcoin gains, but are a widely followed technical event that has historically heralded further gains.
 

 

3. Fund flows into Bitcoin

Over the course of last week, investors pumped in about US$145 million in exchange-traded products that focus on cryptos.

Such inflows are a sign of increasing investors’ appetite for virtual currencies.

An incoming tide of inflows may translate into further gains, or at least prevent Bitcoin prices from falling much further from current levels, due to the heightened demand.

 

Overall, arguably the single-biggest factor that’s most likely to influence Bitcoin’s next big move would be the Fed, and what it conveys to investors and traders worldwide about its intentions for US interest rates this year.

Hence, it warrants very close attention this week.