It’s been two years since the bitcoin price crashed to $3,600 and it’s traded over 10 times higher.
Bitcoin (BTC) starts a new week struggling to hold onto the gains as major macro factors look to shift its future.
It has been a key week in the history of Bitcoin and alt-currencies. The Bitcoin price has plummeted and alt-coins are losing their value at a rapid pace.
Amid an atmosphere of still rampant inflation, quantitative easing still ongoing and geopolitical turmoil focused on Europe, there is plenty of uncertainty in the air, no matter what the trade.
Adding a new cryptocurrency to a volatile market doesn’t always turn out as planned. Sometimes, it ends up making you look like a sucker.
Just like the Internet bubble, where the market seemed to be a fickle thing, even in a bull market, there are times when people can start to think that the whole thing is just a fad. One of those times is when some major news hits the market.
We take a look at the factors set to help move the markets in the coming days.
Russia, China, inflation and the Fed
Crypto is the Fed’s likely Kingmaker this week. On March 16, policymakers will decide whether or not to proceed with a key interest rate hike which has been expected since last year.
The Federal Reserve has a problem — inflation is running hot. But the desire to reduce its record balance sheet from two years of coronavirus excesses is too.
A rate hike is usually done to increase the interest rate. However, the implications can be quite important for Bitcoiners. There is no one single entity that controls the interest rates.
BTC is already firmly attached to US equities, and any knee-jerk reactions to the Fed will likely be copied. The “easy money” period accompanied COVID-19, and the resulting market reaction was a “golden era” that only ended in the last quarter of 2021.
This came as the reality of the Fed’s moves hit home. Bitcoin, likewise, saw an all-time high in November and then began a swift decline.
“This week will be big for crypto and equities traders, as the Fed is expected to decide on a quarter-point rate hike this week. Bitcoin & Ethereum have been pegged to the SP500 in 2022, and these decisions should impact cryptocurrencies greatly,” analytics firm Santiment summarized on March 14.
In addition to the Federal Reserve, there are also several other banks and financial institutions that have expressed concern and disapproval of Bitcoin, although they have not done anything specific to prevent its use.
In Europe, lawmakers are set to vote on cryptocurrency legislation, with some attempting to instigate a ban on proof-of-work systems (Poprotocols citing environmental concerns.
While critics have already dismissed the idea as ridiculous, the threat to sentiment from a potential victory remains.
“A PoW ban would be a ban on guessing a number,” Knut Svanholm, author of Bitcoin: Sovereignty Through Mathematics, warned.
“Think about what such a ban would imply.”
Next door, the Russo-Ukrainian conflict continues to advance along with its economic fallout. That means we risk default, and sanctions and trade blocks are adding to inflationary pressures.
In China, COVID-19 is becoming the new normal with an increasing number of people locked down.
Spot price “celebrates” two years since COVID-19 crash
As such, things are at best precarious for short-term Bitcoin traders.
The first few days of January 2018, the price of bitcoin continued to rise relentlessly. The rapid pace of its gains had not stopped for several days.
“We are yet to see the capitulation dip as per every other macro dip we have seen,” popular Twitter account Crypto Tony argued.
Bitcoin was down about $3,600 from its all-time high and people were wondering what was next. In fact, a few days later they found out, but not until after it crashed.
As previously reported, the $40,000 has remained unclaimed and has yet to be cashed out since its creation on April 17.
The weekly close saw a last-minute dip toward $37,000, BTC/USD, yet managed to reclaim much of the lost ground to trade at around $38,600 at the time of writing.
To better understand what’s happening on the market right now, I like to use the Confluence Floor Model. The Confluence Floor Model is a way of looking at the current situation.
Such a low could fall at around $27,000, however. This would take Bitcoin below its 2021 opening price and briefly out of the range it has consolidated since then.
“I am not convinced we go to 27k, but if history repeats for a 4th straight time that could be the low of this accumulation phase,” Plan C added on Twitter.
Accumulation provides faint silver lining
It seems that at current prices, the demand for Bitcoin is slowly growing.
As we wrote last week, whales are starting to come out of hiding and make their moves on the bitcoin market.
The recent trend of low Bitcoin price continues to make investors uneasy and many are starting to question what Bitcoin is for.
Swift’s announcement came on March 1st.
CryptoQuant has released its latest report showing that Bitcoin’s value is decreasing. Out of the 21 major exchanges it covers, Bitcoin balances are at their combined lowest since early August 2018.
The story of Bitcoin is a complex one. Some of the things that we don’t see are happening. This is important because if something big were to happen in the world, chances are that some of the things that would be affected would be the things that Bitcoin is directly or indirectly associated with.
“During the highly volatile macro and geopolitical events of the last few weeks, exchange net-flow volumes are also reasonably stable, despite a slight bias towards inflows this week,” researchers noted at the time.
Glassnode data shows that exchanges have since lost another $1.9 billion in Bitcoin in the past week.
Market sentiment impresses no one
Bitcoin and wider crypto sentiment is pointing firmly downhill this week. After two months of ranging and fakeouts, bulls are tired and the threat of a macro-induced capitulation hangs in the air.
“Bitcoin sentiment feels worse now than July ‘21 imo and price is over $8k higher now vs. the July ‘21 low,” Twitter analytics account On-Chain College summarized.
Cane Island Digital Research looked at the on-chain realitiy and found that trading volume is falling for the first time since Bitcoin began. This means that traders are less certain about the future direction of prices.
“Bitcoin volume is a horrible indicator of price but it is a decent indicator of sentiment,” it commented.
“It‘s hard to think that volume could go much lower, which means bitcoin must be close to a bottom.”
This could be an indicator of an incoming capitulation and trend reversal. Mark Yusko, founder, CEO and chief investment officer of Morgan Creek Capital Management, described the Cane Island numbers as sentiment “getting close to washed out.
The Crypto Fear & Greed Index remains in “extreme fear” territory, near the 20/100 mark..
Blast-off for volcano bonds?
El Salvador, known to many as the “Land of Volcanos” has officially issued their very own bond as a way of raising capital for the new project. This is a first for the country, but not the world. The bonds are denominated in bitcoin.
The country which became the first to adopt Bitcoin as legal tender last year has since turned to geothermal energy from a volcano to mine bitcoin. This has commentators excited about serious money potentially flowing into the ecosystem.
The fact that El Salvador will be offering new dollar denominated bonds may be seen as a potential bullish catalyst, or at least a positive signal for the crypto market, as it will add liquidity and increase the demand for cryptocurrencies. If that happens, it will be a shift in the global economic paradigm, according to Samson Mow.
The Bitcoin Standard Podcast interviewed Saifedean Ammous this week and he was really optimistic about the future of cryptocurrency.
“So if El Salvador pulls off this bond, then it shows the world that you don’t need to rely on the IMF or any central lending Institute that does not necessarily have your best interest at heart, but you can just fund everything with Bitcoin backed bonds,” he said.
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