Factors Behind Crypto Markets Worst Weekly Performance

Bitcoin has shown no strength in the past week and continues to risk revisiting previous lows. The benchmark crypto appears to be reacting negatively to the current macro environment and a general weakness on the buying side.

Related literature | Risk Aversion Pulls Crypto Market Down, Bitcoin Still Below $40K

At the time of writing, Bitcoin’s price is trading at $38,544 with a loss of 1.2% in 24 hours and a correction of 10.8% in the past week.

BTC trends down on the daily chart. Source: BTCUSD trading summary

As Coin-Crypto reported yesterday, Bitcoin was in “equilibrium” with speculators dumping their coins for loss as bulls try to create a floor. This status quo has existed since the fourth quarter of 2021, causing the price of BTC to move sideways for months.

While constant, this state of the market is fragile and could break through in either direction, but the flip side seems likely. In the short term, bulls have failed to prevent BTC from falling below $40,000.

Material Indicators (MI) data continues to record a significant stack of bid orders at around $36,000 and $35,000. In addition, when BTC recently went to $40,000, there was a quick response from sellers who might try to keep the price down.

This dynamic coupled with low demand indicates a possible active effort for entities trying to fill their coffers at lower levels. A return to the mid-range of about $40,000 could invalidate this theory.

In a recent report, Arcane Research highlights two key macro events that appear poised to bring volatility to Bitcoin and the crypto market. On Thursday, the US will print a new CPI for February, which is expected to continue the upward trend, reaching 7.9%.

Source: Arcane Research

Due to the conflict between Russia and Ukraine, there is a lot of uncertainty about how the US Federal Reserve (FED) will respond to higher inflation. At the moment, the markets seem to believe this will be negative for risky assets, such as Bitcoin.

Inflation, war and an unpleasant week for crypto investors

The previous statement appears to be supported by a rise in commodities. The price of gold (XAU) is on a rally following the Russian invasion of Ukraine. The precious metal is trading north of $2,000, a price last seen in 2020 following the implementation of lockdown measures to prevent the spread of COVID-19.

Gold is returning to the post-2020 rally highs on the daily chart. Source: XAUUSD trading summary

During that period, as gold began its rally, Bitcoin suffered a downward trend as global uncertainty unfolded. Other commodities have started an uptrend such as BTC, ETH, XRP, ADA and other major cryptocurrencies. Arcane Research noted:

Furthermore, the war in Ukraine has had huge implications for commodity markets, sending wheat, oil, gas and nickel soaring – which could complicate central banks’ efforts to fight inflation. More importantly, rising commodity prices could have spillovers, and we are already seeing strange signs in Egypt and Poland.

Related literature | TA: Bitcoin faces an uphill task, why BTC bears are still in control

If central banks, especially the US FED, view inflation as a more persistent problem than originally thought, it could lead them to take faster and more aggressive monetary measures. An aggressive FED could make things worse for an already weak crypto market.

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