B100 FUND Follow Apr 6
· 7 min read
Introduction when geopolitics intrude — forecasting is a thankless task as you do not know what could happen even within an hour.But at the same time, we know the features of different assets and how they react to situations like we have.For example, Gold is a traditional safe-haven asset that we see right now.Stocks usually fall during any geopolitical conflict.And precisely the same reaction we see on Bitcoin — it is falling, like in the same way as stocks do.
Which makes us treat it as a stock-kind asset and forecast its performance in the same way as we do for the stock market.
In two words it means negative reaction to geopolitical escalation as on hawkish Fed policy.
Bitcoin markets have continued to struggle, with prices trading in the range of $35k to $45k level during past tow months.After several weeks form Russian invasion on Ukraine and the moderate US Fed action on interest rate in March meeting, an upward momentum was observed in the crypto currency market which climbed the BTC price up to above $47k level after two months.This brings some optimism to the market, but at the same time, both fundamental reasons could get worse and drain the price down at any moment.
In this report, we analyze the market from three different aspects which are the main sides could help us analyze the cryptocurrency market:
⦁ Macroeconomics
⦁ On-Chain Metrics
⦁ Market Technical
Macroeconomics Fed Raises Benchmark Interest Rate by 25 Basis Points
In a widely anticipated move, the U.S.Federal Reserve said on March 16th that it will lift the fed-funds rate by a quarter-percentage point to a range of 0.25%-0.5% from the current rate of close to zero.This is the first time since December 2018 that the central bank has raised its benchmark interest rate.
The Fed also announced that it will reduce its balance sheet “at a coming meeting.” It didn’t specify whether that will happen at its next meeting in May.
It’s been almost two weeks since the U.S.Federal Reserve announced that it would raise interest rates for the first time in more than three years, and bitcoin (BTC) is still trading above the $40,000 Support area.
The largest cryptocurrency by market cap clearly reacted positively to the Fed’s March 16th decision but looking ahead, the Fed’s aggressive action on interest rate could push down crypto prices, just like it will likely hurt equity markets.
The war between Ukraine and Russia has eroded The more the war between Ukraine and Russia erodes, crypto market becomes more calm and stable.
In past two weeks which market was calm and stable, Bitcoin (BTC) has increased about 20% and it is currently trading above 44K.
If a stressful activity doesn’t happen between Ukraine and Russia, we won’t see a heavy drop in the crypto market and market can continue to increase and even break the 45K resistant area.
But any stressful activity can damage the market, also because of the 45K resistant area we can see a heavy drop in bitcoin and more downtrend movement on low MarketCap Altcoins.
On-chain Metrics The on-chain data shows the behavior of the macro and micro investors.By investigation of the on-chain data, investors general sentiment could be distinguished.In this report, some on-chain parameters are studied to clear the investors behavior:
Money Flow Tracker : Money flow tracker is an indicator which is part of our exclusive MACHINE and developed by our team.This indicator shows the condition of big and old holders, calculated based on the realized cap, mvrv and bitcoin price parameters.
According to this indicator:
2.Whale indicator
Whale indicator is another part of our MACHINE observing the behaviors of bitcoin whales.
This indicator works based on the big wallets balance, exchanges inflow and outflow, exchanges reserve, mvrv and bitcoin price parameters.The whale indicator output is a numbr showing the condition of the market.
If the number is bigger than 60, it means the big whales are selling their coins and if the number is less than 60, it means the market is in the accumulation phase and the whales are adding their coins.
As it has been shown in the below figure, the current number of the whale indicator is about 55 meaning the market is in the accumulation phase and the whales have purchased a lot of coins in the last days ago.
It could be a positive sign for the crypto market.
Technical Analysis The picture above is BTC chart on daily timeframe.As shown in the picture, in past few months bitcoin was in an accumulation phase and was swinging between 37K support area and 45K resistant area.Even the war between Ukraine and Russia couldn’t push the price below 32K support area.Now BTC is on a strong 45K resistant area and we face with two main scenarios here.
The first scenario happens if BTC breaks the 45K resistant area then after a Pullback we probably will see an uptrend movement in price to 53K.
The second scenario happens when BTC can’t break the 45K resistant, then we will see a drop in BTC price to 38K-39K support area.
The picture above is DXY in daily timeframe.
As shown in the picture, the DXY chart is trapped in a triangle after a strong uptrend.Here we have two scenarios.
The second scenario happens when DXY breaks the triangle from below then we will see a downtrend movement in DXY to 96.5 support area.In this case we probably will see an uptrend movement in crypto market.
The chart of the bitcoin per gold price ratio is shown in the above figure.This chart has broken the descending trend line and now has a high potential for growing.Therefore, we probably see the rise of the bitcoin value compared to the gold value in the future days.
And finally, the chart of the USDT dominance is illustrated in the above figure.
According to this chart, the USDT dominance is bearish and it probably means the stablecoins are converting to coins.This action is a positive sign and we could see the cryptocurrency market growth in the future days
Overview and Conclusion The Bitcoin market has now been in a drawdown from the November ATH for 132-days, and prices have consolidated inside the present trading range for over 2-months.This has lead to a compression of yields available from cash-and-carry trades in futures markets, and lower implied volatility in options markets.
At the moment, we have implied volatility climbing, and leverage ratios in futures markets approaching overheated levels, particularly across perpetual futures.Market structure such as this has preceded periods of very high volatility, as was seen in May 2021, and Aug 2021, and thus suggests a regime of higher volatility may be around the corner.
On-chain activity and supply dynamics remain firmly in bear market territory in magnitude and trend, but are somewhat directionless in their forward bias.Should evidence of strength appear in the form of accelerating on-chain activity, and increased supply migrating into long-term holder hands it would favour the bulls, especially given volatility expectations.
Similarly, deterioration would favour the bears.
The market spring appears to be coiled, and a period of higher volatility just over the horizon seems increasingly likely.
Anyhow, we should prepare ourselves for any price in the market, and we should manage our assets keeping an eye for different scenario in the market..