As Bitcoin bulls anticipate for a trip to $50,000 this week, the annual open remains in focus as support.
Bitcoin (BTC) is starting a new week and a new quarter at just over $46,000, as if it were a new year. BTC/USD is nearly at the same level as it was on January 1, 2022, in what will appear to be a nasty case of déjà vu for hodlers. Price activity has been calm — perhaps too quiet — in recent days, but there are clues that the market is busily considering future direction behind the lowering volatility. There are lots of cues to keep a watch on in April, from macro to on-chain, against a backdrop of Bitcoin keeping its yearly open price as support, at least so far.
Inflation collides with new money printing
There has been a lot of discussion about the conclusion of the post-COVID “cheap money” period and how it would affect risk assets like Bitcoin.
Commentators have raised concerns about what might be a shockwave impacting crypto investment as the US Federal Reserve commits to decrease its record-high balance sheet while continuing to raise key rates.
So yet, though, there is little evidence of a major shift in the works, but in Asia this week, the reverse appears to be the case.
According to market analyst Holger Zschaepitz, Japan’s central bank, the Bank of Japan (BoJ), has increased its balance sheet while printing even more liquidity. The Bank of Japan already had the greatest balance sheet in terms of GDP, and that trend is continuing, with a current balance sheet of 136 percent of GDP. This is not only a surprise to Zschaepitz, but it might also be “the biggest monetary experiment in history.” “The ECB and the Fed appear like amateurs in contrast,” he asserted.
Meanwhile, not everyone is confident that the much-touted balance sheet reductions will endure if more printing equals more good times for risk assets. They claim that central banks will soon be forced to resume liquidity injections.
“There has never been a government that has been able to resist the urge to print money in order to pay its expenses and appease its constituents.” The government will never become bankrupt on its own volition. This is self-evident. In a March blog post, Arthur Hayes, the ex-CEO of derivatives behemoth BitMEX, said, “I challenge you to oppose me with evidence.”
“As a result, if your time horizon is measured in years, it is time. You get the horns if you tamper with the bull. Remember: it’s not the price of gold or Bitcoin that’s rising; it’s the value of the fiat currency in which they’re priced that’s falling.”
The opposing viewpoint, as evidenced by last week’s yield curve inversion, pits rate hikes against the now-high probability of a US recession, putting pressure on Bitcoin and equities alike.
Spot bulls are aiming for a $50,000 prize pool
As Monday begins, the absence of volatility is the main topic of discussion among Bitcoin traders and analysts. According to data from TradingView, the traditional but brief euphoria surrounding the weekly close evaporated within hours, with bears still failing to take the yearly open away as support.
With that, BTC/USD is precisely where it was three months ago, but short-term price signs are already indicating that it will continue upward. Popular analyst TechDev is one of them, pointing to Bitcoin’s first “volatility squeeze” since January on the 12-hour chart.
The Bollinger Bands volatility metric, which is now seeing BTC/USD surfing the middle of the channel with a tilt to the upside, was utilised by TechDev. The odds are already stacked against Bitcoin reaching $50,000 for the first time this year. In the meanwhile, April has a lot to live up to, as this month has historically been “excellent” for Bitcoin.
In March, buyers rushed currencies out of exchanges
It’s no news that a lot of Bitcoin has been leaving exchanges this year, but the most recent data reveals the extent of the supply pressure. According to on-chain analytics firm Glassnode, exchange outflows were unusually high last month, with exchanges losing about 100,000 BTC. Only two times in Bitcoin’s history have outflows exceeded 100,000 BTC, making March’s one of the largest. “Aggregate exchange outflows of this magnitude have only been seen on a couple of occasions in history, with the majority occurring following the March 2020 liquidity crisis,” Glassnode wrote accompanying an annotated chart on Twitter.
The ramifications of investors resuming their bottom-buying behaviour following the COVID-19 disaster should be obvious, but they may take some time to play out. While BTC/USD recovered in 2020 following a 60 percent plunge in days, it wasn’t until Q4 that price performance truly changed. Meanwhile, according to CryptoQuant, which measures the balances of 21 major exchanges, overall BTC stockpiles have dropped to their lowest level since August 1, 2018 — 2.303 million BTC.
In March, a meandering fall in 2022 gained traction, with 77,000 BTC withdrawn to private wallets.
Forget about the other season
When it comes to Bitcoin’s relationship with altcoins, an unprecedented thing has occurred: for the first time in over a year, combined open interest and volume on altcoin derivatives markets has surpassed that of Bitcoin. Coinalyze, a crypto analytics company, took notice of the trend and openly speculated that the long-rumored “altseason” has arrived.
“Could be altseason, money is flowing into alts now,” founder Gabriel Dodan said.
Such a viewpoint aligns with data showing significant inflows into cryptocurrencies last week, which one observer claimed indicated an increase in risk appetite among investors. Taking the spotlight away from BTC may not be a drag on performance per se, according to Dodan, because volatility is also dropping. “On the other hand, because it is not over leveraged, BTC is rather stable; it’s a nice floor for BTC,” he stated.
The hash rate has reached a new all-time high
The hash rate has reached new all-time highs, following the Bitcoin network’s record difficulty.
According to data resource MiningPoolStats, the hash rate is now at 223 exahashes per second (EH/s), indicating miners’ confidence in the network’s long-term profitability.
While simply an estimate of the processing power allocated by miners, the hash rate has never been greater, and proponents believe it will continue to rise despite external attempts to “reign in” Bitcoin. Last year, Francis Pouliot, CEO of payment processor Bull Bitcoin, said in a well-known blog post about Bitcoin hash rate and energy consumption, “Bitcoin mining is pretty much the most anti-fragile machine devised by man.”
“Any attack on Bitcoin will inevitably make it stronger, implying a higher price, a greater hashrate, and a higher energy usage.”
The debate between Bitcoin and energy is still raging, with a number of well-known experts attempting to explain what they regard as a logical error – that Bitcoin requires “too much.” They argue that Bitcoin does not waste energy, but rather changes it into something more useful in the form of the most sound money ever produced. In the meantime, regardless of the narrative, the hash rate continues to rise, reinforcing the fundamental positive basis for Bitcoin investment.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.