Bitcoin slides under $39K, leading some traders to forecast a weekend ‘oversold bounce’

March 5, 2022 Coin Telegraph

Bitcoin slides under K, leading some traders to forecast a weekend ‘oversold bounce’

Traders look for a weekend oversold bounce after BTC price sold-off and hit an intraday low at $38,750.

March 4 saw another day of seesaw price action for Bitcoin (BTC) and the wider cryptocurrency market as the global economic fallout from the ongoing conflict in Ukraine weighs heavily on a majority of the world’s financial markets.

Data from Cointelegraph Markets Pro and TradingView shows that after holding $41,000 in the early trading hours on March 4, a wave of selling in the afternoon dropped the price of BTC below $39,100.

*BTC/USDT 1-day chart. Source: TradingView*

Here’s a look at what several analysts have to say about the outlook for BTC moving forward as the world faces a period of increased economic uncertainty.

A potential retest of $38,000

According to Rekt Capital, $43,100 is an important level for BTC because the last time Bitcoin closed below this level on the weekly chat, its “price rejected to the red $38,000 area for a retest.”

Rekt Capital said,

“Upon a weekly close below the black at $43,100, BTC may possibly be positioning itself for a similar price trajectory.”

Traders say keep a close eye on the 50-MA

Further insight into which technical indicators traders have their eye on was provided by independent market analyst Scott Melker. Melker posted the following chart and highlighted the importance of the 50-day moving average (50 MA).

Melker said,

“Humans and bots alike are watching the 50 MA on the daily to see if it will hold. Got some bids there. That's the blue line below price, for those who don't know.”

Overhead resistance at $43,100

Michaël van de Poppe, another independent market analyst, presented a set of important resistance zones to keep an eye on should the price of BTC stage a weekend recovery recovery. Van de Poppe posted the following chart and noted that “Bitcoin is correcting as tensions around Ukraine are increasing, and fear is increasing too as gold is rushing upwards.”

van dePoppe said,

“Might be seeing a bounce, if we do, I'm looking at $43,100-$43,500 as a potential resistance point. Overall shaky markets, altcoins dropping too.”

The overall cryptocurrency market cap now stands at $1.76 trillion and Bitcoin’s dominance rate is 42.7%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Analysts say bulls will aim for $48K now that Bitcoin’s ‘accumulation phase’ has begun

March 2, 2022 Coin Telegraph

Analysts say bulls will aim for K now that Bitcoin’s ‘accumulation phase’ has begun

Bitcoin Price

BTC price appears to be consolidating below $44,000, while analysts highlight $48,000 as the next short-term bull target.

Investor sentiment across the cryptocurrency ecosystem has seen a significant shift in the positive direction over the past week, despite events in the wider world. Currently, Bitcoin (BTC) is back above $43,500 and many altcoins are also witnessing double-digit gains.

*Crypto Fear & Greed index. Source: Alternative*

The ongoing conflict in Ukraine and recent actions taken by governments to limit access to banking services may have helped to shine a light on the value of holding cryptocurrencies, which offers some protection against uncontrollable events and what some might perceive as government overreach.

Data from Cointelegraph Markets Pro and TradingView shows that the price of BTC has oscillated between $43,350 and $45,400 on March 2 as the world awaits some form of resolution to the current conflicts.

Here’s what several analysts are saying about the recent price action for BTC and where it could be headed in the weeks ahead.

Bitcoin accumulation has begun

The sideways price action for Bitcoin has been largely influenced by the fact that the top cryptocurrency “has entered a volume gap” according to crypto analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart highlighting the lower demand in the current price range.

Rekt Capital said,

“Volume Gaps tend to get filled entirely. Major Volume Gap resistance lies ahead at the ~$48,000 region, which happens to be the mid-range area of the macro range.”

Evidence that the price is likely to head higher was provided by Ki Young Ju, CEO of the on-chain analysis firm CryptoQuant. According to Ki, the “BTC accumulation phase” has begun.

*Bitcoin UTXO age bands. Source: Twitter*

According to Ki, “newbies who joined last year are evolving to long-term holders” as the market cap for Bitcoins that are older than six months now accounts for 52% of the total market cap of BTC as opposed to 13% at the recent cyclic top.

He said,

“Unlikely to hit the previous low ($28,000) as the newbies will wait for other newbies in the next cycle.”

Rate hikes could be the next major catalyst

A more in-depth analysis of the effect of current events on the cryptocurrency market was offered by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who noted the hard bounce in BTC from $37,000 to $44,000 “in the couple of hours following Russian President Vladimir Putin’s announcement of a national ban on foreign FX transfers.”

The rapid move upwards “stalled at $44,000, which coincided with the 100-day moving average,” according to Lifchitz, which is “also near the top of the $33,000-$45,000 range in which Bitcoin has been trading in for weeks.

Lifchitz sees the $45,000 resistance as holding firm for now and highlighted the “next hurdle” at $51,000 that still stands in the way before BTC can even attempt to make a run at its all-time high above $64,000.

As for what comes next for BTC in the short term, Lifchitz suggested that “BTC may go down a bit toward the middle of its $33,000–$45,000 range” and noted that “it’s difficult to see BTC breaking above $45,000 and then $51,000 without any significant catalyst.”

Lifchitz said,

“There's the FOMC meeting on March 16th where the FED decides if it hikes rates or not. Technically a rate hike "strengthens" the USD and therefore "weakens" BTC in the BTC/USD pair, so it will be interesting to see how BTC reacts then if the FED hikes rates in 2 weeks, but the impact on BTC may not be drastic.”

Vertical accumulation is a "possibility"

A final bit of insight into BTC's historical performance was provided by analyst and pseudonymous Twitter user Altcoin Sherpa, who posted the following chart showing that the current range has been a significant support and resistance zone since last May.

Altcoin Sherpa said,

“Watching $40,000 to see if we get a pullback. If this is like September then we'll see vertical accumulation and Bitcoin is not going to dip (unless on low time frames) much at all for a bit. I'm guessing I won't get this in the short term.”

The overall cryptocurrency market cap now stands at $1.924 trillion and Bitcoin’s dominance rate is 43.2%.

Bitcoin paints a clear ‘double bottom’ but ailing momentum could force a $34K retest

March 2, 2022 Coin Telegraph

Bitcoin paints a clear ‘double bottom’ but ailing momentum could force a K retest

Bitcoin Price

BTC’s brief spike to $45K prompted some analysts to call a trend reversal, while others caution that a revisit to $34,000 is not out of the question.

Bullish optimism returned to the cryptocurrency market on March 1after a majority of tokens turned green and Bitcoin bulls telegraphed their intention to hold the $40,000 level as support going forward.

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) has surged 20% from a low of $37,409 on Feb. 28 to an intraday high at $44,951 on Tuesday.

*BTC/USDT 4-hour chart. Source: TradingView*

Here’s what several analysts are saying about the sudden bullish reversal in Bitcoin price and what crypto traders can expect moving forward during this time of increased global tensions.

A revisit to $34,000 is “not out of the question”

Prior to Tuesday’s price surge, BTC sellers were firmly in control of the market according to a report from Delphi Digital, which posted the following chart and noted that “in the wake of recent events that have unfolded, being cautious over the last two weeks has indeed proved to be the correct course of action.”

*BTC/USD 6-hour chart. Source: Delphi Digital*

According to Delphi Digital, the major lower support level to keep an eye on is $34,000 based on the amount of support seen there back in January when a hawkish Fed caused markets to tumble “before staging an impressive rally.”

Delphi Digital said,

“Since then, price has failed to sustain momentum and returned to this $34,000 region as Russia announced its invasion of Ukraine. Price has since bounced to $38,000 at the time of writing, but a revisit of the $34,000 support level is certainly not out of the question just yet.”

Hodlers are hopeful

A more bullish projection was offered by on-chain analysis firm Glassnode, which noted that “despite a 50%+ correction” since the highs in November, a majority of the buyers that had entered the market throughout the August to November rally “have not liquidated their positions.”

*Bitcoin URPD on Feb. 27. Source: Glassnode*

According to Glassnode’s analysis of the URPD metric, which shows the distribution of coin supply at the price it last moved on-chain, “the primary redistribution appears to be coming from investors who bought the $60,000+ range” and have recently been selling in the $35,000 to $38,000 price range.

Glassnode said,

“This spending behavior describes a market dominated by price insensitive HODLers, who appear unwilling to liquidate their coins, even if held at a loss. Meanwhile, top buyers have been significantly fleshed out, and represent a far smaller proportion of the investor cohort when compared to May-July 2021.”

Is Bitcoin's reversal official?

A final bit of insight with a bullish bent was offered by options trader and pseudonymous Twitter user John Wick, who posted the following chart noting that “you can see we have a clear double bottom with a nice sign of strength.”

John Wick said,

“We also have a confirmed reversal. Stops should always be set under the signals wick. I would be surprised if this setup takes us over $60,000.”

The overall cryptocurrency market cap now stands at $1.93 trillion and Bitcoin’s dominance rate is 43.2%.

Bitcoin price spike to $39K leads traders to say ‘the panic is over for a few days’

February 25, 2022 Coin Telegraph

Bitcoin price spike to K leads traders to say ‘the panic is over for a few days’

Assets

BTC and stock markets recovered some of their recent losses, leading traders to suggest that the panic selling could be “over for a few days.”

Global financial markets and crypto markets were pummeled over the past 24-hours as the invasion of Ukraine by Russian forces sent investors scrambling and sell-offs took place across most asset classes.

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) hit a low of $34,333 in the early trading hours on Feb. 24, shortly after the Ukraine incursion began, and has since climbed its way back to $38,500 after an unexpected short-squeeze may have rapped bearish investors on the knuckles.

Here’s a look at what several analysts are saying about BTC price and how the ongoing conflict could impact crypto markets in the short-term.

BTC in a “great buy area”

Bitcoin's collapse on the night of Feb. 23 was not unexpected by most traders and according to crypto trader Pentoshi, BTC price could recover the $40,000 mark in the short term.

Despite this positive outlook, Pentoshi expressed wariness “of the overall macro environment,” which “looks pretty dire.”

In a follow-up tweet on Feb. 24, Pentoshi held firm with the projection that BTC will eventually trade higher from here.

Pentoshi said,

“BTC now in the blue value zone. Not exactly the path I'd hoped to take to get here. I think in time this will have been a great buy area.”

A milder correction than was seen in May 2021

A more in-depth assessment of the current situation was offered by David Lifchitz, managing director and chief investment officer at ExoAlpha, who noted that “Bitcoin and other cryptos have been moving up and down in tandem with the Russia/Ukraine news,” so the plunge in cryptos and other assets was expected following “the first, even if surgical, strikes in Ukraine.”

One positive for the crypto market was that there was less leverage at play than during the drawdown in May 2021, which resulted in “less liquidation of over-levered players and hence a milder correction vs. what was seen in May.”

Lifchitz pointed to the fact that Bitcoin's recent low at $34,300 “was near the low of the range it has been stuck in for weeks now,” and suggested that “the direction of Bitcoin and other cryptos will be driven by what happens in the next couple of days with the Ukraine-Russia situation.”

Aside from the short-term impact of this conflict, Lifchitz stated that “the elephant in the room is the Central Banks rate hikes that won’t be as tough as they should be to tame inflation, but will be enough to put more pressure on the economy and the stock market.”

Lifchitz said,

“A hard landing of the last 12 years of Central Banks lax monetary policy is in progress, and the Ukraine-Russia may just have been the pin the "everything bubble" was looking for…”

The initial panic is over

A final bit of insight into how the market will trade in the days and weeks ahead was provided by analyst and independent market analyst Michaël van de Poppe, who posted the following tweet suggesting that the worst of the near-term weakness may be over for now.

Honest view; panic is over for a few days/maybe weeks.

Markets reacting in a sense that #Gold is going to correct, risk-on assets like equities and #Bitcoin are going up.

Potentially runs of 20-45% on #altcoins to happen.
— Michaël van de Poppe (@CryptoMichNL) February 24, 2022

Analysis of what comes next for BTC if the panic continues was also provided by crypto trader and pseudonymous Twitter user AngeloDOGE, who posted the following tweet pointing to support at $25,000 in the event that bears break through the $33,000 level.

Low chance #Bitcoin holds $33k on a second visit.

Sometimes things need to get worse before they can get better.

Upon support failure, $25k $BTC comes next.

Hope for the best, prepare for the worst, and stay off the leverage.
— AngeloƉOGE (@AngeloBTC) February 24, 2022

The overall cryptocurrency market cap now stands at $1.649 trillion and Bitcoin’s dominance rate is 41.9%.

Sub $30K Bitcoin price sell-off would require panic ‘to a large degree’

February 24, 2022 Coin Telegraph

Sub K Bitcoin price sell-off would require panic ‘to a large degree’

Binance

Market analysis suggests that for Bitcoin to start knocking on the door of a sub $30,000 Bitcoin, sellers would “need to panic out to a large degree.”

Order books, essentially the list of orders that a trading outlet implements to show the interest of buyers and sellers, show considerable buyer interest in the $30,000 region on large exchanges Coinbase and Binance.

There is 5,000 Bitcoin sat ready to purchase down to a $30,000 price, and another 7,000 BTC down to a $28,000 price on Binance.

The sell-off may not be over, but Bitcoin (BTC) buyers can take solace in the knowledge that order books in the $28,500 to $30,000 region are dense. Consequently, the price plunge due to Russia’s military operations may take a breather.

*Binance order book. Source: ThinkingBitmex Twitter*

Binance is one of the leading exchanges worldwide, consistently demonstrating the largest spot volume over a 24 hour period, according to Statista.

For Coinbase, it’s a similar story with more acute numbers. There is roughly 3,500 Bitcoin ready to buy for prices approaching $30,000, and 4,500 Bitcoin ready to gobble up Bitcoin down to $28,000.

Glassnode reported that “futures open interest just reached a 6-month low of $1,780,397,103.63” on the Sam Bankman-Fried’s crypto exchange, FTX.

Open interest has been trending down across all exchanges for the past few weeks, meaning that fewer traders are “liquidated” and volatile price swings are less likely.

*BTC open interest on FTX. Source: Glassnode*

Metrics on exchanges Bybit and Binance Futures also reveal minimal open interest. In essence, these exchanges won’t be “deleveraging us out” of the current bearish price action and leveraged positions are waning.

So if leveraged positions or “liquidation cascades” won’t drive the price lower, and there is major but interest down to the $30,000 levels, then what would cause a sub $30,000 Bitcoin?

Spot selling. There has to be a strong reason for sellers who didn’t sell the last time Bitcoin was sub $33,000 to do so this time.

With the Bitcoin Fear and greed index creeping into the “extreme fear” region once more, and BTC dipping 12% overnight, investors' conviction will once again be tested.

Hedge fund report says Bitcoin price is ‘at a relatively inexpensive place’

February 23, 2022 Coin Telegraph

Bitcoin Price

A recent report from Pantera Capital said moves in the debt market and the Fed’s shifting monetary policy could be the fodder that fuels Bitcoin’s next monster rally.

There has been a lot of focus on the performance of the stock and cryptocurrency markets over the past year or two as the trillions of dollars that have been printed into existence since the start of the Covid pandemic have driven new all-time highs, but analysts are now increasingly sounding the alarm over warning signs coming from the debt market.

Despite holding interest rates at record low levels, the cracks in the system have become more prominent as yields for U.S. Treasury Bonds “have been rising dramatically” according to markets analyst Dylan LeClair, who posted the following chart showing the rise.

*U.S. Treasury bond yields across duration. Source: Twitter*

LeClair said,

“Since November yields have been rising dramatically - bond investors begun to realize that w/ inflation at 40-year highs, they are sitting in contracts programmed to decline in purchasing power.”

This development marks a first for the U.S. debt markets as noted in the February letter to investors released by Pantera Capital, which stated “there has never been a time in history with year-over-year inflation at 7.5% and Fed funds at ZERO.”

Matters get even worse when looking at real rates, or the interest rate one gest after inflation, which Panteral Capital indicated is “at negative 5.52%, a 50-year low.”

Pantera Capital said,

“The Fed’s manipulation of the U.S. Treasury and mortgage bond market is so extreme that is it now $15 TRILLION overvalued (relative to the 50-year average real rate).”

*Treasure and mortgage bonds overvaluation. Source: Pantera Capital*

At the same time as treasury bond yields have been rising, Bitcoin (BTC) and altcoin prices have steadily fallen, with BTC now down more than 45% since Nov. 10.

The declines in the crypto market have thus far been highly correlated with the traditional markets as noted by Pantera Capital, but that could soon change as “crypto tends to be correlated with them for a period of roughly 70 days, so a bit over two months, and then it begins to break its correlation.”

According to Pantera's report,

“And so we think over the next number of weeks, crypto is basically going to decouple from traditional markets and begin to trade on its own again.”

Rising rates will be good for Bitcoin

Despite the weakness seen in BTC since the talk of rising interest rates began, the situation could soon improve according to Pantera Capital, which warned that “10-year interest rates are going to triple - from 1.34% to something like 4-5%.”

Based on the well known saying to “be fearful when others are greedy, and greedy when others are fearful,” this might be the opportune time to accumulate BTC because its “four-year-on-year return is at the lowest end of its historical range” according to Dan Morehead, CEO of Pantera Capital, who posted the following chart suggesting that Bitcoin “seems cheap” and “doesn’t look overvalued.”

*Bitcoin price trend vs. 4-year returns.*

Morehead said,

“Once people do have a little bit of time to think this through, they’re going to realize that if you look at all the different asset classes, blockchain is the best relative asset class in a rising rate environment.”

When it comes to a timeline to recovery, Morehead suggested that the turnaround could come sooner than many expect and only be a matter of “weeks or a couple of months until we’re rallying very strongly.”

Morehead said,

“We are quite bullish on the market, and we think prices are at a relatively inexpensive place.”

The overall cryptocurrency market cap now stands at $1.722 trillion and Bitcoin’s dominance rate is 41.6%.

Bitcoin price could ‘probe lower’ as volumes dip and macroeconomic issues loom overhead

February 23, 2022 Coin Telegraph

Bitcoin Price

BTC price is holding slightly below $38,000, but analysts warn that mounting macroeconomic issues and a lack of buyers could lead the price to “probe lower.”

Bitcoin's sell-off appears to be taking a pause even though the United States rolled out new sanctions against Russia on Feb 22.

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) continues to hover slightly below $38,000, which some analysts have identified as a significant support and resistance zone.

Here’s a closer look at what analysts are saying about Bitcoin price and what levels to keep an eye on in the short-term.

25% of entities are underwater

On-chain data outlet, Glassnode, posted the following chart analyzing the percentage of entities in profit and the analysts concluded “that the proportion of on-chain entities in profit is oscillating between 65.78% and 76.7% of the network.”

*Percentage of entities holding Bitcoin that are in profit. Source: Glassnode*

As shown in the chart above, “more than a quarter of all network entities are now underwater on their position,” while “approximately 10.9% of the network has a cost basis between $33,500 and $44,600.”

Glassnode said,

“If the market fails to establish a sustainable uptrend, these users are statistically the most likely to become yet another a source of sell-side pressure, especially if price trades below their cost basis.”

Price could continue to “probe lower”

Further insight into the headwinds facing BTC was provided by cryptocurrency research firm Delphi Digital, who previously noted that Bitcoin was “moving into an area of daily, weekly and monthly resistance.”

This confluence of resistance prompted Delphi Digital to suggest that “$45,000 was a logical place to expect profit-taking/risk reduction activity due to the confluence of resistance zones and the speed and magnitude of the move off recent lows,” which indeed turned out to be the case as the price dumped shortly after reaching that level.

*BTC/USD 12-hour chart. Source: Delphi Digital*

According to Delphi Digital, the price of Bitcoin “has stalled for the last two weeks” and has yet to “reclaim any weekly support structure or the midpoint of the yearly range.”

Delphi Digital said,

“If the $40,000 level fails to hold, the next level of market structure is in the area of $38,500. Should we lose this level, you can expect prior lows to be revisited, with a decent likelihood of price probing lower.”

Whales look to accumulate below $38,000

A final bit of insight into the movement of Bitcoin whales was provided by on-chain analysis firm Whalemap, who posted the following chart highlighting areas where BTC wallets saw heavy inflows during the past four months.

*Large Bitcoin wallet inflows. Source: Whalemap*

Whalemap said,

“Areas of whale interest are very well defined now. $34,000 awaits below $36,000-$37,000. Macro trend reversal above $48,500.”

Possible areas of resistance identified on the chart above include $40,000, $43,500, $46,500 and a major resistance level at $48,500.

A final bit of hope for BTC bulls was offered by Bloomberg Senior Commodity Strategist, Mike McGlone, who posted the following tweet suggesting that Bitcoin is currently on-sale relative to “its annual average since the 2020 and 2018 lows.”

About 20% below its 50-week ma, #Bitcoin is approaching too-cold levels that have often resulted in good price support. Our graphic depicts the most extreme discount for the crypto vs. its annual average since the 2020 and 2018 lows. On Feb. 22, the #DowJones was close to parity pic.twitter.com/SXUaEv0jow
— Mike McGlone (@mikemcglone11) February 22, 2022

The overall cryptocurrency market cap now stands at $1.708 trillion and Bitcoin’s dominance rate is 42.1%.

Analysts say Bitcoin ‘bottom is in’ as BTC bounces back to $38,000

February 22, 2022 Coin Telegraph

<div>Analysts say Bitcoin 'bottom is in’ as BTC bounces back to ,000</div>

Bitcoin Price

Bitcoin price retests a major support/resistance zone at $38,000 as technical analysts and traders suggest that “the bottom is in.”

The ongoing tensions between Russia and Ukraine continue to be the dominant news story on Feb. 22 as Bitcoin (BTC) and the wider global financial tremble under the pressure as the world awaits some form of resolution to the matter.

Data from Cointelegraph Markets Pro and TradingView shows that the price of BTC has traded in a range between $36,360 and $38,330 on Feb. 22 as a swirl of positive and negative developments sent mixed signals to traders who base their trading activity on news headlines.

Here’s a look at what several analysts in the crypto market are saying about the latest price developments for BTC and what levels to keep an eye on moving forward.

A retest of the $38,000 support/retest zone

The cyclical nature of BTC price movements was touched upon by crypto analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart showing that Bitcoin is currently retesting the major support/resistance level at $38,000.

Rekt Capital said,

“Whenever BTC would break beyond the red $38,000 resistance area… It would pullback into this region for a retest attempt before further upside. Green circles show this. Retest is now in progress.”

Aside from a simple retest of support and resistance, this price range has emerged as a significant one when it comes to the bull versus bear market narrative as highlighted in the following chart that was posted by technical analyst Matthew Hyland.

*BTC/USD 1-month chart. Source: Twitter*

Hyland said,

“Bitcoin has a week to avoid having its 4th straight red monthly candle for the first time since the 2018 Bear Market. The monthly must close above $38,500 to close green.”

No need to worry above $30,000

A call for calm was put out by crypto trader and pseudonymous Twitter user JohalMiles, who posted the following chart stating, “I sound like a broken record here but it's hard to believe how bearish people have become and we haven't even broken OR tested $30,000.”

In a follow-up response to the tweet from JohalMiles, cryptocurrency analyst and pseudonymous Twitter user PlanC agreed with this viewpoint and made the case for a bull market moving forward.

PlanC said,

“Basically, unless we break below $30,000 and remain below $30,000 for weeks, I lean bullish. And the $28,000–$30,000 level has acted as very strong support for a year now.”

Sentiment indicates that the end is near

A final bit of insight based sentiment in the Bitcoin market was offered by market analyst and pseudonymous Twitter user Crypto5max, who noted that “based on sentiment, the end is near” and posted the following chart looking at the Advanced NVT Signal, a metric that divides the value of the Bitcoin market capitalization by the 90-day moving average of its daily transaction value.

Crypto5max said,

“We could range, of course, much like in 2021 testing S/R on numerous occasions, but there's a lot of data suggesting bottom's in. You do you, like you always should. But I like to see fear in the market and I am of a different (bullish) opinion.”

The overall cryptocurrency market cap now stands at $1.693 trillion and Bitcoin’s dominance rate is 42.2%.

U.S. inflation breaks 40-year record: Can Bitcoin serve as a hedge asset?

February 18, 2022 Coin Telegraph

Bitcoin Price

Many have likened BTC’s anti-inflation properties to those of gold, but there are important differences between the two assets.

On Feb. 9, the United States Bureau of Labor Statistics reported that the Consumer Price Index, a key measure capturing the change in how much Americans pay for goods and services, has increased by 7.5% compared to the same time last year, marking the greatest year-on-year rise since 1982. In 2019, before the global COVID-19 pandemic broke out, the indicator stood at 1.8%. Such a sharp rise in inflation makes more and more people consider the old question: Could Bitcoin, the world’s largest cryptocurrency, become a hedge asset for high-inflation times?

What’s up with the inflation spike?

Ironically, the fundamental reason behind the unprecedented inflation spike is the U.S. economy’s strong health. Immediately after the COVID-19 crisis, when 22 million jobs were slashed and national economic output saw a massive decrease, the American economy kickstarted a massive recovery on the heels of the relative success of the vaccination campaign. However, supply chains appeared to be unprepared for such a rapid return of business activity and consumer demand.

The rebound was fueled by the Biden administration’s grandiose $1.9 trillion COVID-19 relief package, with the majority of American households receiving thousands of dollars in direct support by the federal government. Tom Siomades, chief investment officer at AE Wealth Management, believes that the stimulus was excessive, given the overall financial conditions of U.S. households. Speaking to Cointelegraph, he remarked:

“The $1.9 trillion CARES act in March, when Americans were already saving at a 20% rate, put more money into the economy than it could bear. That money allowed people who would otherwise have returned to work to rethink their options. This created a worker shortage, which in turn led to demand for higher wages, which meant higher costs and prices.”

Some economists point out a more subtle factor: an alarming exercise of corporate pricing power by U.S. businesses. “Now producers know people can pay more, and will be unwilling to accept lower prices for their products,” Siomades explains.

Now that inflation has become a major political problem for the Democratic Party, all eyes are on the Federal Reserve’s efforts to solve it. The inflation wave is likely to gradually fade, if not to pre-pandemic levels, then to at least more moderate levels by the end of the year. Nevertheless, as rising prices are becoming a matter of increasing public concern, private citizens and investment professionals alike begin to look around searching for a safe haven for their funds — and here’s where Bitcoin comes in.

Bitcoin as the “new gold”

With every year that Bitcoin and the cryptocurrency sector become more mainstream, the frequency of comparisons with gold in terms of reserve-asset potential multiplies. Many observers suggest that Bitcoin could even be more attractive than the precious metal in this regard. In November 2021, the preeminent cryptocurrency was up by 133% year-on-year against gold’s mere 4%.

As Todd Ault of investment company Ault Global Holdings observed, in the last 13 years, Bitcoin has massively outdone U.S. inflation thanks in no small part to the asset’s deflationary properties. He commented to Cointelegraph:

“What makes it a great store of value and inflation hedge is: there’s a cost associated with mining it; there will only be $21 million Bitcoin. Meaning, there is a finite amount of Bitcoin to be mined [...] Really, it’s still a standard hedge people traditionally think about; there’s limited supply, and even in the current financial climate, it will continue to be in demand.”

Unlike gold, Bitcoin lacks the key features of a predictable, low-volatility asset. Maybe this doesn’t pose as much of a problem for a faithful, diamond-hands hodler who believes in Bitcoin’s ultimate monetary dominance, but for someone who has invested a significant share of their personal savings as a shield from inflation, the unpredictability could be unnerving. In some sense, Bitcoin’s price swings strongly contrast the relative stability of gold, which serves not as a wealth multiplier, but as a preserver of purchasing power.

“In theory, Bitcoin should make for a good inflation hedge because there’s a limited supply of tokens that can be mined. That creates a form of scarcity, which could help it hold its value over time compared to fiat currencies,” as Katie Brockman, analyst at investment advising firm The Motley Fool, explained to Cointelegraph. However, Bitcoin can only be a store of value if a significant number of people find it valuable. Brockman added:

“It doesn’t appear that Bitcoin has reached that stage. While inflation has soared, the price of Bitcoin has plummeted in recent months. It has also fallen at roughly the same rate as meme tokens like Dogecoin, suggesting that many investors perceive Bitcoin as simply another cryptocurrency rather than a store of value.”

However, just because Bitcoin is an imperfect hedge against inflation right now doesn’t necessarily mean it will never be a dominant store of value. But if the currency is to become inflation-proof, it will need to gain both widespread acceptance and a robust mainstream reputation.

Hedge over time

Bitcoin’s status will also depend on how investors choose to use it. If people are holding their BTC bags as a hedge against inflation, it may not be subject to the same volatility cycles as equity markets. But if most investors are trading Bitcoin like they would stocks, the asset’s price could be more correlated with the market’s fluctuations.

The future looks bright for the top cryptocurrency, although the timeline is less clear. Ault believes the volatility may stop at the price of about $2 million per BTC. He added:

“In the process, Bitcoin is expected to become a multi-trillion-dollar asset class. That doesn’t make it a direct hedge, but rather a hedge over time.”

One problem that could become more pronounced in the future is uneven distribution of crypto wealth. As the interest in BTC grows in waves and the entry cost for investment grows rapidly, it is inevitable that large chunks of its monetary stock will concentrate among a limited number of wallets.

That brings us to Bitcoin’s paradox. It seems that to become the “new gold” in terms of conservative inflation hedging, the original cryptocurrency needs to outgrow its speculative attractiveness and become a broadly (and, perhaps, more evenly) dispersed mass of money. A sound regulatory framework for crypto is one thing that could definitely help the asset class achieve these goals.

Bitcoin bulls scramble to defend $40,000 as the crypto market sell-off intensifies

February 18, 2022 Coin Telegraph

Bitcoin bulls scramble to defend ,000 as the crypto market sell-off intensifies

Bitcoin Price

BTC and altcoins were hit by another round of selling as analysts say a worsening macroeconomic climate threatens to push Bitcoin price below $40,000.

Bitcoin (BTC) and altcoins dropped further on Feb. 17 after the situation in Ukraine worsened and Russia expelled Bart Gorman, the United States Deputy Chief of Diplomatic Mission, from the country after President Biden reiterated that the threat of a Ukraine invasion by Russia was “very high.”

Data from Cointelegraph Markets Pro and TradingView shows that the afternoon resurgence in sell-side pressure dropped the price of Bitcoin to a daily low at $40,081 as bulls frantically regroup and attempt to prevent a slide below $40,000.

According to analysts, the bullish case for a move higher continues to dwindle as the factors weighing on the crypto market mount.

Real rates and inflation are the main issues

The effect of the Ukraine-Russia situation was touched upon by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who noted that the situation “is definitely weighing on risk assets, up like Feb. 15, down like today.”

While the Ukraine-Russia saga is currently dominating news headlines and causing widespread weakness across global markets, Lifchitz suggested that the situation “looks like a distraction from the real rates/inflation issue.”

According to Lifchitz, this current conflict may only last a few months while “the inflation/rates issue is a multi-year issue that can hit much more, on a broader scale, and for a longer time.”

Lifchitz said,

“Bitcoin is just pulling back into its $30,000 to $50,000 range for now as we remain in a traders' market. So unless there's a significant break below $33,000 or above $48,000, the swing trading will continue and altcoins will follow the move, with just more amplitude.”

Bitcoin remains a strong asset

Despite the recent weakness, market analyst and pseudonymous Twitter trader ‘IncomeSharks’ offered the following words of comfort to help add a little perspective to the long term outlook for BTC.

With everything that has happened over the years how can you not be bullish knowing #Bitcoin is still worth over $40,000? It continues to be worth more almost every single year since it's inception. This is a stronger asset than people give credit.
— IncomeSharks (@IncomeSharks) February 17, 2022

The overall cryptocurrency market cap now stands at $1.85 trillion and Bitcoin’s dominance rate is 41.7%.

BTC Markets