Bitcoin (BTC) begins another week struggling to maintain support as major macro changes 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 will be the main talking point for hodlers.
In an atmosphere of still rampant inflation, still ongoing quantitative easing and geopolitical turmoil aimed at Europe, there is a lot of uncertainty in the air regardless of trade.
Add to that Bitcoin’s failure to capitalize on the chaos and the result is some serious cold feet – what would it take to instill confidence?
Just as it seems as if nothing can break the now-month-old status quo in Bitcoin markets, which have thus far remained stuck in a trading range for all of 2022, upcoming events could nevertheless be a catalyst for a sea change in both sentiment and price action.
CoinTelegraph looks at the factors that will help the markets move in the coming days.
Russia, China, Inflation and the Fed
Fight or not, the Fed is the likely leader when it comes to crypto performance this week.
On Wednesday, policymakers will decide whether or not to proceed with a major rate hike expected since last year.
The Fed has a problem: Inflation is soaring, but so is the desire to cut its record balance sheet after two years of coronavirus excesses.
So an interest rate hike seems only modest – perhaps a quarter of a basis point – but the implications could nevertheless be significant for Bitcoiners.
BTC has already shown a strong attachment to US equities, and any knee-jerk reactions to the Fed are likely to be copied.
Stocks are no friends of rate hikes, as the easy money spell that has accompanied the coronavirus responses was a sort of golden age that didn’t end until late 2021 when the reality of the Fed’s measures set in. Bitcoin also saw a record high in November and then started a rapid decline.
“This week is going to be a big one for crypto and stock traders as the Fed is expected to decide on a one-quarter rate hike this week. Bitcoin and Ethereum will be pegged to the SP500 in 2022, and these decisions should have a major impact on cryptocurrencies,” analysis firm Santiment In summary Monday.
However, the Fed is far from the only macro player Bitcoiners should be concerned about.
In Europe, lawmakers will vote on cryptocurrency legislation, with some seeking to ban Proof-of-Work protocols due to environmental concerns.
Tomorrow, March 14, the ECON committee of the European Parliament will vote on the MiCA, the regulation that will determine the course of cryptocurrency adoption in the EU. #Bitcoin may receive discriminatory treatment due to PoW consensus. wire
— Arnab Naskar (@Arnab_Naskarr) March 13, 2022
While critics have already dismissed the idea as ridiculous, the threat to sentiment of a possible victory remains.
“A PoW ban would be a ban on guessing a number,” Knut Svanholm, author of “Bitcoin: Sovereignty Through Mathematics” warned†
“Consider what such a ban would entail.”
Next door, the conflict between Russia and Ukraine continues to progress, along with its economic fallout – Russia is in danger of default, and sanctions and trade blockades are adding to inflationary pressures.
In China, meanwhile, the Coronavirus itself is back on the radar, with more and more residents locked up.
Spot price “celebrates” two years since Covid crash
As such, things are precarious at best for short-term Bitcoin traders.
Given that any of the above macro factors could trigger a new price in stocks, Bitcoin felt like a sitting duck at the start of the week for many.
“We have yet to see the capitulation dip like any other macro dip we’ve seen,” popular Twitter account Crypto Tony argued†
Such a capitulative move has already been voiced as a grim possibility, and the timing would be grim, almost exactly two years from the day BTC/USD crashed to $3,600 in the first round of Coronavirus chaos.
Today it’s been 2 years since #Bitcointhe presumed death.
Congratulations to those who bought this dip, legendary stuff. pic.twitter.com/2nA8Joithk
— Dylan LeClair (@DylanLeClair_) March 12, 2022
As previously reported, 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 dip towards $37,000, BTC/USD nevertheless managed to regain much of its lost ground to trade around $38,600 at the time of writing.
Analyzing the near-term outlook, fellow Twitter account Plan C turned to its Confluence Floor Model to conclude that a macro price floor could hit in the coming month.
However, such a low could drop around $27,000 and would take Bitcoin below its 2021 opening price and briefly beyond the range it has since consolidated.
⚠️ Very Important Post
The floor #Bitcoin price of the accumulation phases was within 0-29 days, from 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’re going to 27k, but if history repeats itself for the 4th time in a row, that could be the nadir of this accumulation phase,” Plan C added in a Twitter commentary.
Accumulation creates a faint silver lining
As for accumulation, it seems that it is not all bad news when it comes to demand for Bitcoin at current prices.
As Coin-Crypto reported, whales have been active in recent days, while the share of total BTC supply controlled by smaller investors has reached a year-on-year high.
Now those habits are being reflected in the ongoing new lows in stock market offerings.
The changes were spotted Monday by Philip Swift, creator of on-chain analytics resource LookIntoBitcoin.
— Philip Swift (@PositiveCrypto) March 14, 2022
Separating data from an on-chain analytics company CryptoQuant confirms the trend and shows that of the 21 major exchanges it covers, BTC balances are at their combined lowest since early August 2018 – 2.32 million BTC.
The story with exchange balances is quite complex, because different exchanges show different trends.
In the latest edition of her weekly newsletter, “The Week On Chain”, released on March 7, fellow on-chain analytics platform Glassnode paid close attention to the phenomenon, noting that sales-side offerings generally remain “fairly modest” given macro conditions.
“During the highly volatile macro and geopolitical events of recent weeks, the exchange’s net flow volumes have also been fairly stable, despite a slight bias for inflows this week,” researchers noted at the time.
The latest Glassnode data shows that stock exchanges lost another $1.9 billion worth of BTC in the past week.
Market sentiment doesn’t impress anyone
Perhaps unsurprisingly, Bitcoin and broader crypto sentiment are pointing solidly downhill this week.
After two months of shunting and fake-outs, the bulls are tired and the threat of macro-induced capitulation is in the air.
“Bitcoin sentiment now feels worse than July ’21 imo and price is now more than $8k higher than July ’21 low,” Twitter analytics account On-Chain College In summary†
to investigate The on-chain reality this week, research, insight and education sources Cane Island Digital Research highlighted the volume as another telltale sign that momentum had fallen out of Bitcoin.
“Bitcoin volume is a terrible price indicator, but it is a good indicator of sentiment,” it noted.
“It’s hard to imagine that volume could go much lower, meaning bitcoin must be close to a bottom.”
#Bitcoin volume is a terrible price indicator, but it is a good indicator of sentiment. It’s hard to imagine that volume could go much lower, meaning bitcoin must be close to a bottom. pic.twitter.com/6wWtsxLDHa
— Cane Island digital survey (@CaneDigital) March 13, 2022
While this could be an indication of an incoming capitulation and trend reversal, the fear was still palpable.
Mark Yusko, founder, CEO & CIO of Morgan Creek Capital Management, described the Cane Island numbers as sentiment “close to washed out”.
The Crypto Fear & Greed Indexmeanwhile, remains in “extreme fear” territory, near the 20/100 mark that has been like a line in the sand since mid-February.
Crypto Fear & Greed Index (screenshot). Source: TradingView
Blast-off for volcano 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
It could well come this week in the form of El Salvador and the issuance of its much-vaulted 10-year Bitcoin bonds, informally known as the “volcano bonds.”
The country that first used Bitcoin as legal tender last year has since switched to geothermal energy from a volcano to mine BTC.
To that end, it is now seeking long-term investment partnerships by issuing bonds tied directly to mining — a move that has made commentators excited about the fact that serious money can flow into the ecosystem.
While the exact date of the bond’s issuance, which is expected to attract $1 billion, remains unknown, suspicions are mounting that it could come this week.
Aside from the benefits of using the money to invest in BTC, the long-term ramifications of El Salvador’s plan, if successful, should be underestimated as a shift in the global economic paradigm, according to former Blockstream CSO, Samson Mow.
in a interview with Saifedean Ammous on the Bitcoin Standard Podcast this weekend, Mow was as optimistic as anyone in the outlook.
“So if El Salvador brings in this bond, it shows the world that you don’t have to rely on the IMF or a central lending institution that isn’t necessarily in your best interest, but you can just fund anything with Bitcoin covered bonds,” he said. he.