Bitcoin (BTC) begins a new week struggling to preserve support as key macro shifts appear on the horizon.
In what could prove to be a pivotal week for Bitcoin and altcoins’ relationship with traditional assets, the United States Federal Reserve is expected to be the main talking point for hodlers.
In an atmosphere of still rampant inflation, still ongoing quantitative easing and geopolitical turmoil focused on Europe, there is a lot of uncertainty in the air, regardless of the trade.
Add to that Bitcoin’s failure to profit from the chaos and the result is some serious cold feet – what would it take to inspire confidence?
Just as it seems like nothing can break the months-old status quo in Bitcoin markets, which have been locked in a trading range for all of 2022 so far, coming events could nonetheless provide that catalyst. for a sea change in both sentiment and price action. .
Cointelegraph takes a look at the factors set to help move the markets in the coming days.
Russia, China, inflation and the Fed
Fight it or not, the Fed is probably the kingmaker when it comes to crypto performance this week.
On Wednesday, policy makers will decide whether or not to raise key rates expected since last year.
The Fed has a problem – inflation is soaring, but so is the desire to trim its record balance sheet after two years of coronavirus excess.
A rate hike should therefore only be modest – perhaps a quarter of a basis point – but the implications could nevertheless be considerable for Bitcoiners.
BTC has already shown a strong commitment to US equities, and any knee-jerk reaction to the Fed will likely be copied.
Stocks are no friends of rate hikes, as the period of easy money that accompanied the coronavirus backlash was something of a golden era that didn’t end until late 2021 when the reality Fed moves hit home. Bitcoin also saw an all-time high in November and then began a rapid decline.
“This week will be important for crypto and equity traders as the Fed is expected to decide on a quarter point rate hike this week. Bitcoin and Ethereum were pegged to the SP500 in 2022, and those decisions are expected to have a huge impact on cryptocurrencies,” said analytics firm Santiment. abstract Monday.
The Fed, however, is far from the only macro player Bitcoiners need to worry about.
In Europe, lawmakers are poised to vote on cryptocurrency legislation, with some attempting to ban proof-of-work protocols citing environmental concerns.
Tomorrow, March 14, the European Parliament’s ECON committee will vote on MiCA, the regulation that will set the course for cryptocurrency adoption in the EU. #Bitcoins may face discriminatory treatment due to PoW consensus. Thread
— Arnab Naskar (@Arnab_Naskarr) March 13, 2022
While critics have already dismissed the idea as ridiculous, the threat to the feeling of a potential win remains.
“A ban on PoW would be a ban on guessing a number,” Knut Svanholm, author of “Bitcoin: Sovereignty Through Mathematics” warned.
“Think what such a ban would entail.”
Alongside, the Russian-Ukrainian conflict continues to escalate, with its economic fallout – Russia is at risk of default, and sanctions and trade blockages are adding to inflationary pressures.
In China, meanwhile, the coronavirus itself is back on the radar, with increasing numbers of residents locked down.
Spot price ‘celebrates’ two years since Covid crash
As such, things are shaky at best for short-term Bitcoin traders.
Given that any of the macro factors above could trigger another rout in stocks, for many Bitcoin felt like a sitting duck at the start of the week.
“We haven’t seen the capitulation drop yet like every other macro drop we’ve seen,” popular Crypto Tony Twitter account argued.
Such a capitulation move has already been voiced as an absolute possibility, and the timing would be grim, coming almost exactly two years to the day since BTC/USD crashed to $3,600 in the first round of coronavirus mayhem.
Today is the 2nd anniversary of #Bitcoinsis the supposed death.
Congratulations to those who purchased this legendary dip. pic.twitter.com/2nA8Joithk
— Dylan LeClair (@DylanLeClair_) March 12, 2022
As previously stated, support levels remain unclaimed as $40,000 refuses to hold for more than a few days or hours.
The weekly close saw a last-minute drop towards $37,000, with BTC/USD still managing to recoup much of the lost ground to trade at around $38,600 at the time of writing.
Analyzing the short-term outlook, another Twitter account, Plan C, turned to its confluence floor model to conclude that a macro price floor could be expected in the coming month.
Such a low, however, could drop to around $27,000 and take Bitcoin below its 2021 opening price and briefly out of the range it has been consolidating in since then.
⚠️ Very important message
Ground #Bitcoins the price of the accumulation phases was within 0-29 days, of the last 3 crosses
We had a cross 9 days ago, will history repeat itself? #Crypto
— Plan©️ (@TheRealPlanC) March 13, 2022
“I’m not convinced we’ll hit 27,000, but if history repeats itself for the 4th time in a row, this could be the low of this accumulation phase,” Plan C added in the comments on Twitter.
Buildup provides a low silver lining
As for the accumulation, it looks like it’s not all bad news when it comes to Bitcoin demand at current prices.
As Cointelegraph reported, whales have been active for the past few days, as the proportion of global BTC supply controlled by retail investors hit a year-to-year high.
Today, these habits are reflected in the continued decline in stock market supply.
The changes were noted by Philip Swift, creator of on-chain analytics resource LookIntoBitcoin, on Monday.
— Philip Swift (@PositiveCrypto) March 14, 2022
Separate on-chain analytics company data CryptoQuant confirms the trend and shows that across the 21 major exchanges covered, BTC balances are at their lowest combined level since early August 2018 – 2.32 million BTC.
The history of forex balances is actually quite complex, as different exchanges exhibit different trends.
In the latest edition of its weekly newsletter, “The chain week“, published on March 7, Glassnode, another on-chain analysis platform, devoted particular attention to the phenomenon, noting that the offer on the sell side remains “quite modest” overall given the macroeconomic circumstances.
“During the highly volatile macroeconomic and geopolitical events of the past few weeks, net trade flow volumes are also reasonably stable, despite a slight bias in favor of inflows this week,” the researchers noted at the time.
the latest Glassnode data shows that exchanges have since lost an additional $1.9 billion in BTC last week.
Market Sentiment Impressing Nobody
Unsurprisingly, perhaps, but Bitcoin and broader crypto sentiment are pointing firmly down this week.
After two months of range and fakeouts, the bulls are tired and the threat of a macro-induced capitulation hangs in the air.
“Bitcoin sentiment is worse now than July 21 imo and price is over $8,000 higher now than the July 21 low,” On-Chain College Twitter analytics account abstract.
Exam on-chain reality this week, research, insight, and education resource Cane Island Digital Research pointed to volume as another telltale sign that momentum had fallen off Bitcoin.
“Bitcoin volume is a horrible price indicator, but it is a good sentiment indicator,” he commented.
“It’s hard to think that volume could go much lower, which means bitcoin must be near a bottom.”
#Bitcoins volume is an awful price indicator, but it’s a good sentiment indicator. It’s hard to think that the volume could go much lower, which means bitcoin must be near the bottom. pic.twitter.com/6wWtsxLDHa
— Cane Island Digital Research (@CaneDigital) March 13, 2022
While this could be an indicator of an impending capitulation and trend reversal, the fear was still palpable.
Mark Yusko, founder, CEO and CIO of Morgan Creek Capital Management, describe Île de la Cane is a feeling “close to erasure”.
the Crypto Fear and Greed Indexmeanwhile, remains in territory of “extreme fear”, close to the 20/100 mark which has served as a line in the sand since mid-February.
Take-off for Volcanic Bonds?
Looking for a counterpoint to the seemingly endless bad news from macro sources?
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, DOT, SAND, RUNE, ZEC
That may well come this week in the form of El Salvador and the issuance of its heavily vaulted ten-year bitcoin bonds, known informally as “volcano bonds.”
The country that became the first to adopt Bitcoin as legal tender last year has since turned to geothermal energy from a volcano to mine BTC.
To that end, it is now seeking long-term investment partnerships by issuing bonds directly linked to mining – a move that has commentators excited about the serious money potentially pouring into the ecosystem.
While the exact date of the bond issuance, which is expected to attract $1 billion, remains unknown, suspicions are growing that it could take place this week.
Besides the benefits of using the money to invest in BTC, the long-term consequences of El Salvador’s plan, if successful, should be underestimated as a shift in the global economic paradigm, according to the former CSO of Blockstream, Samson Mow.
In one maintenance With Saifedean Ammous on the Standard Bitcoin Podcast this weekend, Mow was as optimistic as anyone about the outlook.
“So if El Salvador withdraws this bond, it shows the world that you don’t have to rely on the IMF or some central lending institute that doesn’t necessarily have your best interests at heart, but you can just finance with Bitcoin backed bonds,” he said.