Patience is a rare virtue in the cryptocurrency space. Just two weeks ago Bitcoin surged more than 15%, jumping from $37,000 to nearly $42,000, but traders and investors have grown frustrated by its moves over the past two weeks.
“Do something!” was the prevailing sentiment online as multiple rejections occurred at the $43,000 resistance level during the last fortnight. But be careful what you wish for: yesterday’s fresh pullback put Bitcoin in a position where it could move the other way and potentially test support near $38,000.
Trading view (via Binance)
Tension in Ukraine
Markets are largely in a holding pattern because the geopolitical backdrop is sensitive worldwide. More specifically, Putin is engaged in an extremely dangerous game near Ukraine’s border, and investors are closely monitoring developments in Eastern Europe. The crypto sector is not the only stakeholder— the S&P 500 closed down more than 2% yesterday as the risk of a worst-case scenario appeared materially more likely. Bitcoin fell from near $44,000 to its current position just above $40,000.
Rate hikes
As if the prospect of a regional conflict were not dire enough, another feared term has recently dominated headlines for investors: rate hikes. After January’s explosive inflation figures—the highest since 1982—markets are now pricing in a series of increases during 2022. In short, the party that the Fed has effectively hosted over the last couple of years looks like it may be winding down.
Range trading
One of the main narratives driving crypto’s rally has been its role as an inflation hedge: a way to escape the weakening of fiat caused by aggressive money printing. With the Fed signaling a hawkish turn, that inflation-hedge thesis is losing some of its luster. Combined with the broader downturn in European risk sentiment, notoriously volatile Bitcoin becomes especially vulnerable.
Warren Buffett famously said, “Be fearful when others are greedy, and be greedy when others are fearful.” Right now, fear is pervasive, and with Bitcoin just one red candle away from testing $38,000 support, this week promises to be interesting. The $43,000 resistance level feels a long way off at the moment.
Of course, one comment from Putin—either way—could change everything. Against that backdrop, it would not be surprising to see Bitcoin trade in a $38,000–$43,000 range for the time being.