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Bitcoin looks like it is treading on thin ice as February fails to match the gains of last month.

Bitcoin (BTC) starts the second week of February in a newly bearish mood as multi-month highs fail to hold.

In what may yet bring vindication to those predicting a major BTC price comedown, BTC/USD is back under $23,000 and making lower lows on hourly timeframes.

Feb. 6 trading may not yet be underway in Europe or the United States, but Asian markets are already falling and the U.S. dollar gaining — potential further hurdles for Bitcoin bulls to overcome.

With some macroeconomic data to come from the Federal Reserve this week, attention is mostly focused on next week’s inflation check in the form of the Consumer Price Index (CPI) for January.

In the build-up to this event, the results of which are already hotly contested, volatility may gain a fresh foothold across risk assets.

Add to that those aforementioned concerns that Bitcoin is long overdue a more significant retracement than those seen in recent weeks, and the recipe is there for difficult, but potentially lucrative trading conditions.

Cointelegraph takes a look at the state of play on Bitcoin this week and considers the factors at play in moving the markets.

BTC price disappoints with weekly close

It is very much a tale of two Bitcoins when it comes to analyzing BTC price action this week.

BTC/USD has managed to retain the majority of its stunning January gains, these totaling almost 40%. At the same time, signs of a comedown on the cards are increasingly making themselves known.

The weekly close, while comparatively strong at just under $23,000, still failed to beat the previous one, and also represented a rejection at a key resistance level from mid-2022.

“BTC is failing its retest of ~$23400 for the time being,” popular trader and analyst Rekt Capital summarized about the topic on Feb. 5.

An accompanying weekly chart highlighted the support and resistance zones in play.

“Important BTC can Weekly Close above this level for a chance at upside. August 2022 shows that a failed retest could see BTC drop deeper in the blue-blue range,” he continued.

“Technically, retest still in progress.”

As Cointelegraph reported over the weekend, traders are already betting on where a potential pullback may end up — and which levels could act as definitive support to buoy Bitcoin’s newfound bullish momentum further.

These currently center around $20,000, a psychologically significant number and also the site of Bitcoin’s old all-time high from 2017.

BTC/USD traded at around $22,700 at the time of writing, data from Cointelegraph Markets Pro and TradingView showed, continuing to push lower during Asia trading hours.

“Some bids were filled on this recent push down (green box) but most of the remaining bids below have been pulled (red box),” trader Credible Crypto wrote about order book activity on Feb. 5.

“If we continue lower here eyes still on 19-21k region as a logical bounce zone.”

For a quietly confident Il Capo of Crypto, meanwhile, it is already crunch time when it comes to the trend reversal. A supporter of new macro lows throughout the January gains, the trader and social media pundit argued that breaking below $22,500 would be “bearish confirmation.”

“Current bear market rally has created the perfect environment for people to keep buying all the dips when the current trend reverses,” he wrote during a Twitter debate.

“Perfect scenario for a capitulation event in the next few weeks.”

Fed officials to speak as market eyes CPI

The week in macro looks decidedly calm compared to the start of February, with less in the way of data and more by way of commentary set to define the mood.

That commentary will come courtesy of Fed officials, including Chair Jerome Powell, and any hint of policy change contained within their language has the potential to shift markets.

The week prior saw just such a phenomenon play out, as Powell used the word “disinflation” no fewer than fifteen times during a speech and Q&A session accompanying the Fed’s move to enact a 0.25% interest rate hike.

Ahead of fresh key data next week, talk in analytics circles is on how the Fed might transition from a restrictive to accommodative economic policy and when.

As Cointelegraph reported, not everyone believes that the U.S. will pull off the “soft landing” when it comes to lowering inflation and will instead experience a recession.

“DON't be surprised if the term "soft-landing" remains around for a while before the rug being pulled in Q3 or Q4 this year,” investor Andy West, co-founder of Longlead Capital Partners and HedgQuarters, concluded in a dedicated Twitter thread at the weekend.

In the meantime, it may be a case of business as usual, however, with smaller rate hikes after Powell’s “mini victory lap” over declining inflation, further analysis argues.

“Personally, my belief is that the Fed will most likely raise by +0.25% in the upcoming two meetings (March & May),” Caleb Franzen, senior market analyst at CubicAnalytics, wrote in a blog post on Feb. 4.

“Of course, all future actions by the Fed will be dependent on the continued evolution of inflation data & broader macroeconomic conditions.”

Franzen acknowledged that while recession was not currently an apt description of the U.S. economy, conditions could still worsen going forward, referencing three such cases in past years.

Closer to home, next week’s CPI release is already on the radar for many. The extent to which January’s data supports the waning inflation narrative should be key.

“Post-FOMC, we have a heap of 2nd tier data releases including the important ISM services and NFP,” trading firm QCP Capital wrote in forward guidance mailed to Telegram channel subscribers last week.

“However the decider will be the Valentine's Day CPI - and we think there are upside risks to that release.”

Miner "relief" contrasts with BTC sales

Turning to Bitcoin, it is network fundamentals currently offering some stability amid a turbulent environment.

According to current estimates from BTC.com, difficulty is stable at all-time highs, with only a modest negative readjustment forecast in six days’ time.

This could well end up positive depending on Bitcoin price action, however, and a look at hash rate data suggests that miners remain in fierce competition.

A countertrend comes in the form of miners’ economic behavior. The latest data from on-chain analytics firm Glassnode shows that sales of BTC by miners continue to increase, with their reserves dropping faster over 30-day periods.

Reserves correspondingly totaled their lowest in a month on Feb. 6, with miners’ balance at 1,822,605.594 BTC.

Overall, however, current price action has provided “relief” for miners, Philip Swift, co-founder of trading suite Decentrader says.

In a tweet last week, Swift referenced the Puell Multiple, a measure of relative value of BTC mined, which has left its “capitulation zone” to reflect better profitability.

“After 191 days in capitulation zone, the Puell Multiple has rallied. Showing relief for miners via increased revenue and likely reduced sell pressure,” he commented.

NVT suggests volatility will kick in

Some on-chain data is still surging ahead despite the slowdown in BTC price gains.

Of interest this week is Bitcoin’s network value to transaction (NVT) signal, which is now at levels not seen in nearly two years.

NVT signal measures the value of BTC transferred on-chain against the Bitcoin market cap. It is an adaption of the NVT ratio indicator, but uses a 90-day moving average of transaction volume instead of raw data.

NVT at multi-year highs may be cause for concern — network valuation is relatively high compared to value transferred, a scenario which may prove “unsustainable,” in the words of its creator, Willy Woo.

As Cointelegraph reported late last year, however, there are multiple nuances to NVT which make its various incarnations diverge from one another to provide a complex picture of on-chain value at a given price.

“Bitcoin's NVT is showing indications of value normalization and the start of a new market regime,” Charles Edwards, CEO of crypto investment firm Capriole, commented about a further tweak of NVT, dubbed dynamic range NVT, on Feb. 6.

“The message is the same further through history and more often than not it is good news in the mid- to long-term. In the short-term, this is a place we typically see volatility.”

Small Bitcoin wallet show "trader optimism"

In a glimmer of hope, on-chain research firm Santiment notes that the number of smaller Bitcoin wallets has ballooned this year.

Related: Bitcoin, Ethereum and select altcoins set to resume rally despite February slump

Since BTC/USD crossed the $20,000 mark once more on Jan. 13, 620,000 wallets with a maximum of 0.1 BTC have reappeared.

That event, Santiment says, marks the moment when “FOMO returned” to the market, and the subsequent growth in wallet numbers means that these are at their highest since Nov. 19.

“There have been ~620k small Bitcoin addresses that have popped back up on the network since FOMO returned on January 13th when price regained $20k,” Twitter commentary confirmed on Feb. 6.

“These 0.1 BTC or less addresses grew slowly in 2022, but 2023 is showing a return of trader optimism.”

A look at the Crypto Fear & Greed Index meanwhile shows “greed” still being the primary description of market sentiment.

On Jan. 30, the Index hit its “greediest” since Bitcoin’s November 2021 all-time highs.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.