Banking sector concerns are visible, but Bitcoin price and crypto market as a whole seem to be quite elevated, what could we attribute such price action to?
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The question you see above is the one we addressed to Dominik Podlaski from Bitget. Let's find out what's his approach to such developments.
Dominik Podlaski (Bitget): There are multiple reasons why the price of Bitcoin skyrocketed over a few days. Several robust impulses emerged within a short timeframe, resulting in a large-scale rally. To gain a comprehensive understanding, it is best to examine each of these impulses separately.
FED monetary policy pivot
Dominik Podlaski (Bitget): Surprisingly, the current situation in the banking sector, which initially triggered major market sales, ended up helping Bitcoin to recover to its previous price levels. Why did this happen? The severe risk of a "domino effect" in the banking sector compelled the Federal Reserve System to halt monetary policy tightening and take drastic measures to rescue the economy. As shown on the chart below, the one-week inflows (7-14 March) equaled the outflows from the previous four months since 15th November. The sudden influx of funds into the market triggered substantial rallies in assets that were less threatened than banks. The pivot itself acted as a significant bullish impulse for all investors, who had been eagerly anticipating it.
Read next: USA: PPI data is another confirmation that inflation remains on the right track| FXMAG.COM
(source: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm)
Bitcoin Technical Analysis – S/R flip and 200 MA retest
Dominik Podlaski (Bitget): In January 2023, Bitcoin surpassed a critical resistance level. Traders who use technical analysis eagerly await confirmation of the trend pivot because this marks the best entry zone for new positions. This explains why the price of Bitcoin reacted with a substantial move after a successful retest of the previous long-term resistance level. Furthermore, it bounced off the 1D 200MA, which is a significant bullish indicator and perceived by many as the start of a new bull market. As depicted on the chart below, the retest was clear, smooth, and robust.
(source: https://www.tradingview.com/chart/rzYtuBmD/?symbol=BITGET%3ABTCUSDT)
Bitcoin Dominance
Dominik Podlaski (Bitget): The trends rule over every single aspect of the markets. Traders observe a lots of different charts to fully grasp what’s ahead of them. One of such charts/indicators is BTC.D chart, the Bitcoin Dominance, which states what share of cryptocurrencies market is Bitcoin marketcap. Recent movement of Bitcoin coincided with breakout of its dominance over other crypto assets. What does it mean? In simple words it means the liquidity flows from the altcoins (short for: “alternative coins” – all cryptocurrencies except Bitcoin) to Bitcoin. Traders watching BTC.D closed their altcoins positions in order get Bitcoin long positions, what provided additional liquidity to Bitcoin rally.
(source: https://www.tradingview.com/chart/rzYtuBmD/?symbol=CRYPTOCAP%3ABTC.D)
The financial cycles
Dominik Podlaski (Bitget): As mentioned earlier, the price of Bitcoin follows cycles of the financial market, but it also has its own cycle due to the halving event. Each bear market concludes with capitulation and a local low. Following the so-called "bottom," the sentiment is typically negative, and the community often refers to any signs of the bear market ending as "another bear market rally." However, taking the example of Bitcoin's price action in 2018-2019, this "rally" may actually mark the start of a phase of sideways movement between bear and bull markets. Although it may not sound profitable, the previously mentioned example led to almost 350% growth from the exact bottom and nearly 240% growth within 86 days of the rally's commencement, as depicted on the chart below. Therefore, in a situation like this, traders are usually eager to enter the market as early as possible, right after they see confirmation of the new cycle.
(source: https://www.bitget.com/en/spot/BTCUSDT_SPBL?type=spot)
Summary
Dominik Podlaski (Bitget): The recent rally in Bitcoin has been fueled by significant liquidity inflows. This demonstrates the relevance of real-life events for Bitcoin's price and at the same time it has also shown detachment from stock price movements. Naturally, many of us wonder, "What's next?" However, the key to making accurate forecasts lies in fully understanding what has already happened and why.
