FX.co ★ Bitcoin recoups February fall and reaches $24k: should we expect further price movement to $25k?

Over the past five days, the crypto market has experienced several powerful spikes in volatility, which resulted in the volume of liquidated positions reaching $500 million. The main conclusion that can be drawn from recent events is that the market has become very manipulative.

Inflation has become the main catalyst for the growing volatility and manipulativeness of the stock and crypto markets. The results of the Fed's hawkish policy produced an unpredictable result that almost led to a massive sell-off.

Fed Policy and Its Impact on the Cryptocurrency Market

The cosmic level of inflation in the United States led to the USD becoming the main asset in 2022, and the stock and crypto markets consolidated and moved in a united front. A similar situation began to occur in late February and early March 2023.

High rates of liquidity withdrawals, a strong labor market and Powell's announcements have made Bitcoin and other assets especially susceptible to the news background. As a result, Bitcoin began to decline to $21k amid Powell's disappointing statements about the upcoming Fed policy.

The decline in investment activity in relation to crypto products was also the result of the policy of the last three weeks. According to CoinShares, the volume of funds withdrawn from crypto products reached a record $255 million.

However, the situation with the SVB bank, although it had disturbing consequences for the USDC and the crypto market, played into the hands of the crypto industry. The Fed and other agencies managed to put out the fire and issue compensation to all those affected by the collapse of the bank, but Goldman Sachs is confident that there will be no significant increase in the key rate in March.

This confidence is reinforced by the broken ice in the labor market, where the number of initial jobless claims exceeded 200,000. The U.S. economy has begun to crack, and the weakening labor market and the situation with the banking system will force the Fed to be more cautious with rate hikes.

BTC/USD Analysis

Bitcoin clearly followed the mood of the crowd, which changed depending on the situation. A week after the start of the active price movement, we can confidently say that there was a classic aggravation of the situation after an absolute lull in the market.

The BTC price movement was a manipulation, the main purpose of which was to collect liquidity in the $19.5k–$23k range. This movement was made possible by the pessimistic mood in the market in recent weeks and the ever-increasing volumes of shorts.

As a result, we are witnessing a successful withdrawal of liquidity in the downward direction and an instant recovery movement facilitated by positive news. Bitcoin price has risen by 9% over the day and is trading near the $24.3k level.

The fundamental value of the cryptocurrency is also not in question, as more than 66% of all BTC has not moved in over a year. Also, as of March 14, addresses with balances under 100 BTC have 40% of all BTC volume on the market.

At the moment, Bitcoin reached $24.9k, where it faced strong resistance from sellers. As a result, the asset pulled back to $24.3k, where the price is consolidating for a second move to $25k.

The technical metrics on the daily chart confirm the local flat, while the MACD has formed a bullish crossover and is approaching the green zone. This is a positive signal indicating the formation of a strong medium-term upward trend.

The 4-hour chart shows local consolidation within a narrow range of $24.2k–$24.5k needed to retest $24.9k–$25.1k. Technical metrics also point to a stabilization of the situation and a local flat.

Results

The situation in the crypto market is moving in the direction of improvement after the Fed's overstimulation. The labor market and banking system problems will serve as a deterrent to aggressive policy.

Bitcoin has locally proved to be a strong asset for hedging risks, along with silver and gold, and therefore the coming months may become productive for the asset with the final break in correlation with SPX and stock indices.