As hodlers prepare for certain volatility, a week unlike any other in Bitcoin’s history has arrived.
What are the biggest obstacles that investors face as Bitcoin (BTC) enters a new week in the shadow of a new global conflict?
Bitcoin, like many other assets, is feeling the strain in what has become an unrecognisable macro-environment compared to even days ago.
Russia’s invasion of Ukraine and following war against it is wreaking havoc on global markets, and events can completely change mood in hours or minutes.
The timing has also hurt Bitcoin: its “safe haven” status is being put to the test as investors seek safety and currency holders seek an exit.
looks at what might be in store for Bitcoin in the immediate term as it deals with complex and somewhat surreal global developments as the dominant influence this week.
The following are five items for BTC investors to consider this week.
The conflict in Ukraine has taken centre stage.
The biggest driver of market performance this week is, without a doubt, the Russia-Ukraine conflict.
The situation, which only took shape five days ago, is still in flux – sanctions continue to be imposed, both sides and their friends continue to knuckle down, and markets react to fresh threats and probabilities.
The economy of Russia is one of them, and it is expected to be in upheaval on Monday. Stock trading has been delayed until at least 3 p.m. local time, and the outlook for Russia’s currency, the ruble, is dismal, as it is already trading at record lows.
The talks are set to start on Monday, and any ray of hope might create a shift in the short-term outlook, changing the complexion of markets.
While uncertainty reigns, everyone will be looking for the ultimate safe haven, and the usage of Bitcoin — whether by regular Russians and Ukrainians or their governments — is already a hot topic.
Ukraine’s army has already gathered millions of dollars in cryptocurrency aid, and far-reaching sanctions against Russia might pave the way for a shift to Bitcoin as a currency.
The suggestion has not gone unnoticed by the establishment, with Ukraine’s deputy president, Mykhailo Fedorov, calling on exchanges to restrict Russian and Belarusian users’ cash.
“Bitcoin is like a knife to a physician or a knife to a criminal,” summed up podcast presenter Preston Pysh over the weekend.
“Its value derives from the intention behind its application, as it does with all valuable technology throughout history.”
Markets, on the other hand, will most certainly be influenced by changes in events on the ground and their ramifications for governments.
Urals med crude (russian oil) vs brent pic.twitter.com/ePk6V7cSCu
— Zhu Su 🔺 (@zhusu) February 28, 2022
So far, oil — but not Russian oil — has been one of the few winners of the war, while Bitcoin has been relatively constant, unlike gold, which rose quickly and then lost all of its gains.
However, the correlation between bitcoin and altcoins and regular stock markets remains, and low timeframes are likely to cause traders serious headaches regardless of how the fight plays out.
The price activity on the spot market is being hampered by macro-force majeure.
With traditional markets expected to be extremely turbulent on Monday, predicting how Bitcoin will perform in the short term is a real challenge.
Aside from correlations, Bitcoin has managed to stay in a very narrow range so far, and $40,000 is a definite resistance zone for bulls to overcome.
The concern is that any more dramatic move could be the result of substantial macro developments in the future, making it an unreliable longer-term signal.
“Bitcoin is predicting a tough week for risk assets,” Mike McGlone, chief commodity analyst at Bloomberg Intelligence, said on Sunday morning at 5:00 EST (Feb. 27).
Meanwhile, a popular Twitter account pointed out that current prices are the so-called point of control (PoC) for the past 15 months, with $38,000 seeing significant volume compared to other price points in the current range.
“The playing field appears to be fairly easy when it comes to Bitcoin,” a more optimistic Michal van de Poppe argued.
“After a week of positive movement, the market is consolidating. If more momentum is desired, the corrections need not be too severe, therefore $38.1-38.2K must hold. Then it’s possible we’ll go to $44K.”
With U.S. markets yet to open as of this writing, the picture could change drastically by the end of the day.
A comparison to March 2020 may be beneficial; at the time, Bitcoin sank in accordance with global markets before rebounding as an asymmetric gamble that took hodlers on a nine-month bull run never seen before.
Remember the March 2020 Bitcoin Crash? (-82% from 2017 high). Imo unlikely to recur, but it could if another macro shock comes around. I psychologically prepare by imagining absolutely sitting tight while the market repeatedly punches me in the face. https://t.co/X8l699B4w1
— Tuur Demeester (@TuurDemeester) February 27, 2022
Another month has passed, and another red candle has been lit.
For Bitcoin market watchers, Sunday’s closure did not go quite as planned.
A last-minute sell-off eliminated the possibility of completing the week and month over $38,500, giving the market its first four consecutive monthly red candles since the 2018 bear market began.
Last week’s events, which were already an unexpected setback, appear to be making matters worse for Bitcoiners, who have yet to see the cryptocurrency branch out on its own, away from traditional assets.
Analysts are also concerned about the monthly chart’s relationship to its 21-month exponential moving average (EMA), which may dissolve as support if losses persist.
The breaking of the 21 EMA has been a regular element of Bitcoin macro bear trends, with February thankfully avoiding a repeat performance.
“The Monthly Close tomorrow is crucial. If we close below $37,000 (purple 21m/EMA), we’ll get the same negative signal as all past previous Macro Downtrends,” analyst Kevin Svenson warned.
Bitcoin had previously failed to recapture two significant moving averages as a pretext for reclaiming greater resistance levels nearer November’s all-time highs. As a result, analyst Rekt Capital indicated at the time that the range low at $28,000 may be revisited.
On the good side, Bitcoin’s 200-week moving average crossed $20,000 for the first time this weekend, a landmark that few anticipate will be challenged as support.
Difficulty helps to keep the ship afloat.
Turning away from geopolitics, investors have every reason to believe in the Bitcoin network’s strength.
Miners continue to mine despite price constraints and uncertainties in virtually every timeframe, and hash rate and difficulty have continued to rise.
This week could bring a change to the status quo: the hash rate is stable, but difficulty is set to drop for the first time in 12 weeks to account for the most recent modifications.
This isn’t a very “bad” event — the 1.25 percent drop is minor by Bitcoin’s standards and is more likely to reflect sporadic fluctuations in miner involvement than the start of a new trend.
According to the monitoring site MiningPoolStats, the hash rate is still above 200 exahashes per second (EH/s), which is a significant departure from only a few months ago when Bitcoin was at all-time highs.
Over the last year, there has been a lot of discussion about how fundamentals differ from price.
The question now is whether, as in previous years, price will follow hash rate.
The worst is predicted by mood.
Bitcoin does not appear to have “loved” the rise of a new military conflict in Europe, in keeping with its motto.
Aside from its prospective functions, the largest cryptocurrency is not benefiting from recent developments in terms of sentiment.
The market is fast becoming more apprehensive, according to the Crypto Fear & Greed Index, a sentiment gauge that has gained significant attention in 2022.
BTC/USD took a slight drop overnight into Monday, but it was enough to push the Index back into “severe anxiety” zone, dropping from 26/100 on Sunday to 20/100 on Monday, its lowest level since February 22.
For comparison, the local lows of $32,800 in January yielded a Fear & Greed reading of 11/100, a level that has frequently served as a macro low in recent years.
Commentators responded by arguing that the price drop into Monday could be a forewarning from the free market that doom and gloom will reign supreme come TradFi market activity.
#Bitcoin already sending signals on Monday market sentiment? pic.twitter.com/pP1rtvJGFg
— jeroen blokland (@jsblokland) February 27, 2022
The Dread & Greed Index, crypto’s traditional analogue, was likewise in “severe fear” mode last week before recovering.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
