Bitcoin (BTC), as an asset with one of the highest volatility, offers a unique risk-and-reward calculus to those brave enough to delve in. About a week ago, the world’s largest cryptocurrency by market capitalization was firmly perched on the precipice of reclaiming its macro uptrend. However, following the CFTC’s hard-hitting indictment of Binance yesterday, the bears are again gaining the upper hand. Is this budding bearish sentiment sufficient to derail Bitcoin’s near-term bullish thesis? Let’s find out.
Bitcoin Has a Significantly Positive Correlation With Federal Reserve’s Balance Sheet
Source: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
Above, you will find the Federal Reserve’s total assets, expressed in millions of dollars and spanning the year-to-date period.
Source: CoinMarketCap
Next, note Bitcoin’s price action so far this year. While the world’s premier cryptocurrency notched significant gains during the beginning of the year, coinciding with a broad-based rally in risk assets amid expectations of an imminent Fed pivot, Bitcoin soon entered a consolidation pattern that lasted from the 14th of January till the 12th of March.
New Fed bal sheet just dropped
Added $95B since last week. That fully cancels the *monthly* QT they’re doing.
And over the past 10 days they’ve canceled about two thirds of the entire QT they did since they started the rolloff a year ago. pic.twitter.com/wSvrsstLeD
— Dan McArdle (@robustus) March 23, 2023
Thereafter, as the Federal Reserve unleashed a veritable liquidity bazooka to combat the banking crisis that has engulfed mid-sized banks in recent days following the collapse of the Silicon Valley Bank (SVB), Bitcoin ripped higher.
The chart above illustrates this positive correlation that exists between Bitcoin and the Federal Reserve’s balance sheet.
“Bitcoin is just responding to liquidity”
Lol that is the point! BTC is built to counter loose fiat monetary and fiscal policy.
It is a validation of its fundamentals if it goes up in response to lower rates, QE, stealth QE, Fed bailouts, fiscal packages, M2 going up, etc.
— Dan McArdle (@robustus) March 14, 2023
Some people dismiss Bitcoin’s legendary bull markets as simply a function of the Federal Reserve’s largesse. However, as illustrated in the tweet above, this is exactly how “honest money” should react. This positive correlation allows Bitcoin to avoid the debasement that naturally follows an aggressive expansion of the supply of money.
With the Federal Reserve now nearing peak interest rates, the emerging prospects of a veritable volley of new liquidity are likely to continue to act as a potent tailwind for Bitcoin.
The CFTC’s Binance Indictment Has Ruined the Party for Bulls
As we detailed yesterday, the CFTC has now charged Binance and its CEO, Changpeng Zhao (CZ), on multiple counts, including wilful evasion of federal law and operating an illegal digital asset derivatives exchange. The indictment contained several striking allegations, including an assertion that 300 accounts associated with Changpeng Zhao were exempt from Binance’s insider trading policy. The authorities are also investigating transactions that are suspected to have been carried out by the terror group Hamas.
#BTC rallied +48% this month alone
And recently dipped -7%
Perspective$BTC #Crypto #Bitcoin
— Rekt Capital (@rektcapital) March 28, 2023
Bitcoin’s response to this development has been rather swift. The apex cryptocurrency dipped 7 percent in the immediate aftermath and is currently confined in a short-term holding pattern. Do note, however, that so far this year, Bitcoin is still up a whopping 60 percent.
Bitcoin’s Macro Uptrend Is Now Under Threat
It’s possible that #BTC could start the month of April with some downside
But as long as $BTC Monthly Closes above ~$25000, that downside would constitute a healthy retest attempt of the then-broken Macro Downtrend#Crypto #Bitcoin
— Rekt Capital (@rektcapital) March 28, 2023
As tabulated by Rekt Capital, Bitcoin needs to close the month of March above the $25,000 price level to reclaim its macro uptrend.
The #BTC 200-week MA hasn’t been reclaimed as support
Should $BTC indeed dip from current levels, that would likely be the next major retest zone#Crypto #Bitcoin pic.twitter.com/TMuidqr86d
— Rekt Capital (@rektcapital) March 28, 2023
Nonetheless, in the wake of Binance-induced weakness, the apex cryptocurrency might retest its 200-day moving average, thereby establishing the technically pertinent metric as near-term support.
On a 3 month rolling basis of the #Bitcoin hash rate (cancel out noise), this is the third most aggressive upwards adjustment in the past 5 years.
Only on two occasions has there been more substantial growth.
May 2021 – 70% (coming off the China mining ban).
After the 2019… pic.twitter.com/jocblsgAZ4
— James V. Straten (@jimmyvs24) March 27, 2023
Do note, however, that Bitcoin’s hash rate continues to increase at an astonishing rate, with the latest upward adjustment in computation difficulty constituting the third most aggressive one in the past five years.
Despite the dip, #BTC is still well-positioned to confirm a breakout beyond the Macro Downtrend later this month$BTC #Crypto #Bitcoin pic.twitter.com/zuxlj4hxfl
— Rekt Capital (@rektcapital) March 28, 2023
Meanwhile, the bulls continue to wait with bated breath to see whether Bitcoin pulls off a breakout.
The post Bitcoin Has Entered Its Make-or-Break Period as Macro Uptrend Looms Amid a Liquidity Bazooka From the Federal Reserve by Rohail Saleem appeared first on Wccftech.
