Bitcoin (BTC) starts a new week in the shadow of a new geopolitical conflict: what are the main obstacles facing investors?
In what has become an unrecognizable macro environment compared to a few days ago, Bitcoin, like many other assets, is feeling the pressure.
The Russian invasion and subsequent war against Ukraine is wreaking havoc on global markets, and events can shake sentiment in a matter of hours or minutes.
The timing has affected Bitcoin as well: Its “safe haven” status is undergoing a serious test as investors seek safety and shareholders look for an exit.
As this week’s top influencer, Cointelegraph takes a look at what could be in store for Bitcoin in the short term as it faces complex and almost surreal macro events.
Five topics for BTC investors this week can be found below.
Ukraine war dominates
Needless to say, the conflict between Russia and Ukraine is the main driver of market performance this week.
The situation, which emerged in its current form only five days ago, remains in a state of flux: sanctions keep coming, both sides and their allies continue to bring themselves to their knees, markets react to new threats and odds.
Chief among them is Russia’s economy, which is gearing up for turmoil on Monday. Stock trading was delayed to at least 3 pm local time, and the outlook is grim for its currency, the ruble, already trading at record lows.
The talks are scheduled to start on Monday, and any glimmer of hope could spark a shift in the near-term outlook and thus change the face of the markets.
However, while uncertainty reigns, everyone will seek the ultimate safe haven, and the use of Bitcoin, whether by ordinary Russians and Ukrainians or their governments, is already a topic of conversation.
As Cointelegraph reported, Ukraine’s military has already raised millions of dollars in crypto aid, and far-reaching sanctions against Moscow could yet facilitate a shift to Bitcoin as an economic tool.
The idea has not passed the establishment by – Mykhailo Fedorov, Vice President of Ukraine, call exchanges to block the funds of Russian and Belarusian users.
“Bitcoin is like a knife to a surgeon or a knife to a criminal,” Podcast Host Preston Pysh wrote the weekend, summarizing the situation.
“Like any technology valuable over time, its value comes from the intent behind its use.”
In the meantime, markets are likely to be buoyed depending on changing events on the ground and the repercussions for governments.
Urals Med Crude (Russian Oil) vs Brent pic.twitter.com/ePk6V7cSCu
— Zhu Su (@zhusu) February 28, 2022
Until now, oil, but not Russian oil, has been one of the few beneficiaries of the war, while Bitcoin has managed to remain fairly stable, unlike gold, which first gained rapidly and then lost all of its newly gained ground.
However, the correlation of Bitcoin and altcoins with traditional stock markets remains and therefore low time frames can provide a real headache for traders, whatever turns the war takes.
Spot Price Action Faces Macro Force Majeure
With the traditional markets poised to be extremely volatile at their respective open on Monday, guessing how Bitcoin will fare in the shorter time frames is a real problem.
Correlations aside, Bitcoin has managed to stay in a fairly tight range so far, and $40,000 is a clear resistance zone for the bulls to break out of.
The problem, however, is that any more dramatic moves could ultimately be the result of large macro swings and thus be an unreliable long-term signal.
“Down about 4% on Sunday at 5:00 EST (Feb 27) from Friday, Bitcoin signals a tough week for risk assets,” Mike McGlone, chief commodity strategist at Bloomberg Intelligence warned.
Meanwhile, a popular Twitter account indicated that the current levels represent the so-called point of control (PoC) over the last 15 months, with $38,000 seeing heavy volume relative to other price points in the current range.
“When it comes to Bitcoin, the playing field seems pretty simple”, a more optimistic Michaël van de Poppe. argument.
“Consolidation occurring after a move higher during the past week. If you really want to see more momentum, then the corrections should not be that deep, so stay between $38.1 and $38.2K. So we could go to $44K.”
With the US markets yet to open at the time of writing, the picture may change completely before the end of Monday.
A comparison to March 2020 may be helpful: at that time, Bitcoin first aligned with global markets, only to rally as an asymmetric bet that sent hodlers into a never-before-seen bull run for the next nine months.
Do you remember the Bitcoin crash of March 2020? (-82% from the maximum of 2017). It is unlikely to repeat itself, but it could happen if another macro shock emerges. I prepare myself psychologically by imagining myself sitting absolutely still while the market repeatedly punches me in the face. https://t.co/X8l699B4w1
— Tuur Demeester (@TuurDemeester) February 27, 2022
Another month, another red candle
Sunday’s close did not really go as planned for Bitcoin market watchers.
A last minute dip eliminated the chances of closing the week and month above $38,500 and thus giving the history books its first four consecutive monthly red candles since the 2018 bear market.
The events of last week, already an unexpected drop, seem to make things worse for bitcoiners, who have yet to see the cryptocurrency branch out on its own, away from traditional assets.
Another headache for analysts is the monthly chart relative to its 21-month EMA, which could fade as support if losses continue.
The breakout of the 21st EMA has been a common feature of Bitcoin’s bearish macrotrends, and February fortunately prevented a repeat performance.
“Tomorrow’s monthly closing is fundamental. If we close below $37,000 (purple 21m/EMA), that gives us the same bearish signal as every other bearish macrotrend before,” analyst Kevin Svenson warned against a graph showing the level.
BTC/USD (Bitstamp) 1-month candlestick chart with EMA 21. Source: TradingView
Bitcoin previously failed to recapture two key moving averages as a pretext to retake higher resistance levels closer to November’s all-time highs. The result, analyst Rekt Capital warned at the time, could be a potential revision of the $28,000 range low.
On the upside, Bitcoin’s 200-week moving average, a benchmark few believe will be challenged as support, broke above $20,000 for the first time this weekend.
Difficulty stabilizes the ship
Moving away from geopolitics, investors have every reason to keep faith in the strength of the Bitcoin network.
Despite price pressures and uncertainty on virtually every timeframe, miners continue to mine, and hash rate and difficulty have continued to rise.
This week there may be a challenge to the status quo: the hash rate is constant, but the difficulty will drop for the first time in 12 weeks to account for the latest changes.
This is nothing “bad” as a phenomenon: the 1.25% decline is modest by Bitcoin standards and likely reflects circumstantial changes in miner participation, rather than the start of a new trend.
According to the monitoring resource MiningPoolStats, the hash rate, for its part, remains above 200 exhashes per second (EH/s), a radical change from a few months ago when Bitcoin reached its all-time highs.
Bitcoin hash rate chart (screenshot). Source: MiningPoolStats
The fundamental divergence from price has been largely covered over the past year.
The question now is whether the price will follow the hash rate as in years past.
Sentiment predicts the worst
Bitcoin, true to its mantra, does not seem to have “liked” the emergence of a new armed conflict in Europe.
Related: Top 5 Cryptocurrencies to Watch This Week: BTC, LUNA, AVAX, ATOM, FTM
Its potential roles aside, the largest cryptocurrency is not enjoying a sentiment boost as a result of recent events.
According to the Crypto Fear & Greed Index, a sentiment indicator that has received increasing attention in 2022, the market is getting increasingly nervous.
BTC/USD saw a relatively small drop overnight on Monday, but that was enough to drag the Index back into its “extreme fear” territory, from 26/100 on Sunday to 20/100, its lowest level since 22 February.
For context, the January local lows of $32,800 produced a reading of 11/100 for Fear & Greed, this level often constitutes macro lows in recent years.
Crypto Fear & Greed Index (screenshot). Source: Alternative.me
In reaction, commentators, however, argued that the price decline through Monday could be a warning from the free market that pessimism will reign when TradFi market trading begins.
— jeroen blokland (@jsblokland) February 27, 2022
Meanwhile, Crypto’s traditional counterpart, the Fear & Greed Index, was also in “extreme fear” mode last week ahead of a rally.
This post War tests BTC price: 5 things to watch in Bitcoin this week
was published first on https://cointelegraph.com/news/war-puts-btc-price-to-the-test-5-things-to-watch-in-bitcoin-this-week