Crypto Is At A Decisive “Critical Stage”

  • After last year’s extreme volatility, bitcoin has been trading largely in a range around $40,000 since the start of 2022.
  • The driving forces of the crypto market are different from previous cycles, analysts say.
  • Market watchers have a set of key indicators that they follow to determine if the bull market will resume.

Bitcoin has been on hold for months; certainly since the beginning of 2022. The extreme


volatility

of 2021 seems to have partly evaporated. Investors can’t seem to collectively decide if prices have corrected enough to resume the long-term uptrend, or if another sharp drop is needed to reset the market.

Where bitcoin goes, the broader crypto asset market tends to follow, in broad terms. There are periods of divergence and the movements of other pieces tend to be more dramatic, but the direction of travel is often the same. For example, bitcoin has fallen nearly 16% so far this year to hold around $40,000, while smaller, well-traded altcoins such as solana, cardano, and avalanche have lost between 30-40% this year. period.

Another interesting aspect of the situation is that crypto now exhibits a greater positive correlation with traditional markets than in previous cycles. When considering the outlook for asset prices, it has become important to consider the performance of stocks, especially in the technology sector. Since the beginning of this year, bitcoin has moved in parallel with the S&P 500. Last year, the two moved in tandem about half the time.

Geopolitics is also impacting crypto to a degree never seen before, especially the conflict in Ukraine.

Analysis from Huobi Research Institute, which is among one of the top ten crypto exchanges in the world by volume, identified some key factors driving the market and attempted to gauge where the price might go from there. .

“The fall in bitcoin price, which now sits below $40,000, has many wondering if the cryptocurrency


bull market

which began in early March is indeed over,” said William Lee, the lead researcher.

“The market is at a critical juncture, and this will determine the future direction of bitcoin (BTC) prices. From a macro perspective, it was the Russia-Ukraine war and its currency substitution effect that led to the rise in the price of BTC in March, when many citizens exchanged their Russian ruble for BTC to mitigate the effects of the ruble’s devaluation and the sanctions imposed by the United States and the European Union, “said he declared.

“The situation, however, is not as simple as it seems. The tightening of US and EU crypto sanctions against Russia since April, measures that have affected both individuals and businesses in Russia, and the global financial market has entered a new era. The US consumer price index (CPI) has gradually recovered, and the change in monetary policy is inevitable,” Lee said.

The technical aspects of bitcoin also paint a complex picture, with the possibility of a “triple peak” pattern forming.

“From a technical analysis point of view, it can be observed that BTC has seen two peaks since it started its third bull run in the second half of 2020, and is currently positioned to move towards a third peak, in line with the triple cutting-edge format,” Lee said.

bitcoins


Houbi


“However, this wave, often dubbed wave B, was primarily caused by the Russia/Ukraine war. This wave has often been dubbed the latest ‘vanishing wave’; therefore, if price continues to develop and form this third peak, the market will likely see a sharp decline after the price changes from wave B to wave C,” Lee said.

Lee also pointed out that the Relative Strength Index offers clues as to where things might go. The RSI is a key indicator that measures the momentum of a market based on the direction and magnitude of recent price movements.

“The overall price of BTC is still rising, despite the recent price decline indicating that the market has not formed an effective breakthrough to the lower line. The current RSI index is below 50, indicating a weak market, however , this number has not yet fallen below 30, which means that the market is not yet in an oversold statistic,” Lee said.

“Most importantly, the cryptocurrency market is currently at a critical juncture. If the price continues in the channel, then wave B will continue; otherwise, the market will fall even more sharply,” he said.

Marcus Sotiriou, an analyst at GlobalBlock, a UK-based digital asset broker, noted that the crypto is now reacting to inflation readings in the US. If this continues to be the case, it introduces a much more structured and consistent way of assessing conditions in the crypto markets, closer to the stock market.

“Bitcoin and the S&P 500 fell after the release of March US CPI data. The year-over-year CPI rose 8.5%, higher than the 8.4% expected and another all-time high CPI reading in the past 40 years.This has grabbed the headlines adding further concerns of a


recession

looming this year. However, I think the CPI data was bullish.”

However, Sotiriou also spotted a few reasons to fear that the current fork may collapse as “whales” make a splash. Whale is the slang term for the biggest holders of an asset. In crypto, monitoring their movements is crucial for analyzing the market.

“Despite bitcoin rising yesterday, as it now consolidates above $41,000, on-chain metrics suggest cause for concern,” he said. “Glassnode data shows that the number of addresses with a balance of more than 10,000 bitcoins has decreased significantly over the past week.

“During this period, at least four whales have sold their bitcoin – it may seem insignificant, but each of these addresses sold over $400 million worth of bitcoin. This is an important metric to review because whales usually have the power to control the direction of the market.I am still bullish for the crypto market in the near term due to the extreme fear and negative sentiment,” Sotiriou said.

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