Bitcoin (BTC), which begins a new week under the shadow of a geopolitical conflict, — what are the major hurdles investors face?
Bitcoin is feeling the pressure in an environment that has been hard to recognize compared to just a few days ago.
The Russian invasion of Ukraine and the subsequent war against it are causing havoc on global markets. These developments can quickly upend sentiment, sometimes in just hours.
Bitcoin’s timing is also a problem — investors are looking for safety, while fiat holders are looking for exits.
Cointelegraph, the dominant influence this week examines what Bitcoin might face in the near term in light of complex and surreal macro events.
Below are five topics that will interest Bitcoin investors this week.
Ukraine war dominates
It is obvious that this week’s main driver of market performance was the Russia-Ukraine war.
The current situation has only been created five days ago. It is still in flux. Sanctions keep coming, both sides continue to play down, and markets respond to new threats.
Russia’s economy is the most prominent. It is currently in turmoil and is expected to go into chaos on Monday. Stock trading has been moved to at least 3 p.m. local time. The prognosis for Russia’s currency, the ruble is grim, with its trading already at record lows.
Talks are set to start Monday. Any glimmering hope could lead to a shift in the short-term outlook, which could change the market’s face.
Uncertainty is a constant, but everyone will seek the ultimate safe haven. Bitcoin’s use — by ordinary Russians, Ukrainians, or their governments — has already been a hot topic.
Cointelegraph reported that the Ukrainian army has raised millions in crypto aid. The far-reaching sanctions against Moscow may allow for a shift to Bitcoin as an economic tool.
This idea was not accepted by Mykhailo Fedorov (the deputy president of Ukraine), who called for exchanges to stop Russian and Belarusian funds.
Preston Pysh, podcast host, wrote that Bitcoin is “like a knife for a surgeon or knife for a criminal,” summarizing the situation.
“Like all valuable technologies throughout history, their value comes down to the intent behind their use.”
Markets will be affected by changes in the ground and any knock-on effects for government.
Urals med crude (russian oil) vs brent pic.twitter.com/ePk6V7cSCu
Zhu Su (@zhusu), February 28, 2022
Oil, but not Russian oil, has been the only beneficiary of the war. Bitcoin, however, has managed to stay relatively stable — unlike gold which gained quickly and then lost all of its gains.
However, the correlation between Bitcoin and altcoins and traditional stock markets is still there. Low timeframes can be a problem for traders, regardless of how much war it takes.
Spot price action faces macro force majeure
Traditional markets are expected to be volatile on Mondays, making it difficult for anyone to predict how Bitcoin will perform in the shortest timeframes.
Correlations aside: Bitcoin has so far managed a relatively tight range and $40,000 is clearly a resistance zone for bulls.
However, any further dramatic moves could be a result major macro changes, and therefore may not be reliable long-term signals.
“Bitcoin is down about 4% on Sunday at 5:00 EST (Feb. 27),” Mike McGlone, chief commodity strategist, Bloomberg Intelligence, warned.
Popular Twitter account noted that the current levels are the point of control (PoC), with $38,000 seeing larger volumes than other price points within the current range.
“When it comes Bitcoin, the playing fields seem quite simple,” said Michael van de Poppe, a more optimistic individual.
“Consolidation occurs after a bullish movement during the last week. If you want to see more momentum, the corrections should not be too deep. $38.1-38.2K must remain. We could then be moving to $44K.
The U.S. market is still closed at the time this article was written, so the picture could change completely before Monday.
It may be helpful to compare March 2020 to that date. At that time, Bitcoin fell in line with global market prices, but then rebounded as an asymmetric wager that took hodlers on an unprecedented bull run for the next nine month.
Do you remember the March 2020 Bitcoin Crash. (-82% compared to 2017 high). It is unlikely that this will happen again, but it could happen if there is another macro shock. Psychologically, I mentally prepare by visualizing myself absolutely sitting still while the market continually punches me in my face. https://t.co/X8l699B4w1
— Tuur Demeester (@TuurDemeester) February 27, 2022
Another month, another red candle
For Bitcoin market observers, Sunday’s closing did not go as planned.
Last-minute diving eliminated the chance of closing the week or the month above $38,500 and gave the history books the first four consecutive monthly red candles since 2018.
It’s already an unexpected turn of events, and last week’s events seem to be only making matters worse for Bitcoiners. They have yet to see cryptocurrency grow independently from traditional assets.
Analysts also have to be concerned about the monthly chart relative its 21-month exponentially moving average (EMA), that could cause problems and even disappear as support if losses continue.
Breaking the 21 EMA has been a feature of Bitcoin’s macro bear trends. February avoided a repeat performance.
“Tomorrow’s Monthly Close will be critical. Analyst Kevin Svenson cautioned against charts showing this level if we close below $37,000 (purple-21m/EMA).
BTC/USD 1-month candle charts (Bitstamp), with 21EMA. Source: TradingView
Bitcoin had previously failed to reclaim 2 key moving averages, which was used as a pretext to retake higher resistance levels at all-time highs in November. Analyst Rekt Capital warned that the result could lead to a reversal of the $28,000 range low.
Positive news: Bitcoin’s 200-week moving mean, which is a benchmark few believe will be challenged for support, reached $20,000 this weekend.
Difficulty keeps the ship steady
Investors have every reason not to lose faith in the strength and stability of the Bitcoin network, despite the fact that they are turning their backs on geopolitics.
Despite uncertainty and price pressures, miners continue to mine, and the difficulty and hash rate have remained constant despite all of this.
This week could see some changes to the status quo. The hash rate remains steady, but the difficulty will decrease for the first 12 weeks.
While this is a “bad” phenomenon, the 1.25% drop is still quite manageable. It likely reflects changes in the participation of miners and not the beginning of a new trend.
Monitoring resource MiningPoolStats says that the hash rate remains at or above 200 exahashes/second (EH/s), which is a significant increase from months ago, when Bitcoin reached its highest point.
Screenshot of the Bitcoin hash rate chart Source: MiningPoolStats
Over the past year, extensive coverage has been given to the divergence between fundamentals and price.
Now the question is whether or not price will follow the same hash rate that it did in years past.
Sentiment predicts the worst
Bitcoin, true as its motto, doesn’t seem to have liked the emergence in Europe of a new armed conflict.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC. LUNA. AVAX. ATOM. FTM.
The potential roles of the largest cryptocurrency aside, it isn’t feeling the sentiment boost from recent events.
The Crypto Fear & Greed Index is a sentiment indicator that has been receiving increasing attention since 2022. It shows that the market is becoming more nervous.
BTC/USD experienced a small drop overnight into Monday. However, that was enough to push the Index back into “extreme fear” territory, from 26/100 on Sunday, to 20/100 on Monday, its lowest level since February 22.
This is to give you an idea of what the local lows of January of $32,800 were like. It gave rise to a reading 11/100 for Fear & Greed. This level has been regarded as a macro low in recent years.
Screenshot: Crypto Fear and Greed Index Source: Alternative.me
Commentators reacted and suggested that Monday’s price drop could be an indication that the TradFi market will see doom and gloom.
Is #Bitcoin already sending signals about Monday market sentiment? pic.twitter.com/pP1rtvJGFg
— jeroen Blokland (@jsblokland), February 27, 2022
The traditional Fear & Greed Index was also in “extreme fear” mode before a recovery.