Bitcoin (BTC) begins a new week in the shadow of a new geopolitical conflict: What are the main obstacles faced by investors?
In what has become an unrecognizable macro environment compared to even days ago, bitcoin, like many other assets, is feeling the pressure.
Russia’s invasion and subsequent war against Ukraine is wreaking havoc on world markets, and events can alter sentiment in a matter of hours or minutes.
The moment has also affected bitcoin: its quality as a “safe haven” is being put to the testas investors seek safety and fiat bagholders seek an exit.
As the predominant influence this week, Cointelegraph takes a look at what could happen to bitcoin in the short term as it holds up against complex and almost surreal macro events.
Next, five topics for BTC investors this week.
Ukraine war dominates
Needless to say the conflict between Russia and Ukraine is the main driver of market performance this week.
The situation, which only emerged in its current form five days ago, remains in a state of constant flux: the sanctions keep coming, both sides and their allies keep spinning their heads, the markets react to new threats and odds.
The main one is the Russian economy, which is preparing for Monday’s turmoil. Stock trading has been delayed until at least 3:00 p.m. (local time), and the outlook is grim for its currency, the ruble, which is already trading at record lows.
The talks are scheduled to start on Monday, and any glimmer of hope could cause a shift in the short-term outlook and thus change the face of the markets.
However, as long as uncertainty is the norm, everyone will be looking for the last 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, the Ukrainian military has already raised millions of dollars in crypto aid, and far-reaching sanctions against Moscow could make it easier for them to use Bitcoin as an economic tool.
The idea has not been lost on the establishment: Mykhailo Fedorov, Vice President of Ukraine, asked exchanges blocking the funds of Russian and Belarusian users.
“Bitcoin is like a knife for a surgeon or a razor for a criminal”, wrote weekend podcast host Preston Pyshsummarizing the situation.
“Like any technology that is valuable over time, its value comes from the intent behind its use.”
For its part, markets will likely move based on changes on the ground and the implications for governments.
Urals med crude (russian oil) vs brent pic.twitter.com/ePk6V7cSCu
— Zhu Su (@zhusu) February 28, 2022
Ural crude (Russian oil) vs Brent.
Until now, oil -but not Russian- has been one of the few beneficiaries of the war, while bitcoin has managed to remain quite stable, unlike gold, which first gained quickly and then lost all the newly gained ground.
However, The correlation of bitcoin and altcoins with traditional stock markets remains, so low timeframes can be a real headache for traders, regardless of the turns the war takes.
Spot Price Action Faces Macro Force Majeure
With 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.
Leaving aside the correlations, bitcoin has managed to stay in a fairly tight range so far, and $40,000 is a clear resistance zone to beat for the upside momentum.
However, the problem is that any more dramatic moves could ultimately come as a result of large macro swings and thus be a dodgy long-term signal.
“Down about 4% on Sunday at 5:00 EST (Feb 27) from Friday, bitcoin is signaling a tough week for risk assets,” warned Mike McGlonechief commodity strategist at Bloomberg Intelligence.
A popular Twitter account, meanwhile, he pointed what the current levels represent the so-called Point of Control (PoC) of the last 15 months, and that the $38,000 level sees heavy volume relative to other price points in the current range.
“As far as bitcoin is concerned, the playing field seems pretty straightforward,” argument a more hopeful Michaël van de Poppe.
“Consolidation is taking place after a move higher over the past week. If you really want to see more momentum, the corrections should not be that deep, so the $38,100-38,200 levels should be held. So, we could reach USD 44,000.”
With US markets yet to open at the time of this writing, the landscape could change completely before the end of Monday.
A comparison with March 2020 may be helpful: At the time, bitcoin first fell in line with global markets, only to bounce back as a lopsided bet that sent hodlers on a never-before-seen bull run for the next nine months.
Remember the March 2020 Bitcoin Crash? (-82% from 2017 high). Imo unlikely to recur, but it could if another macro shock comes around. I psychologically prepare by imagining absolutely sitting tight while the market repeatedly punches me in the face. https://t.co/X8l699B4w1
— Tuur Demeester (@TuurDemeester) February 27, 2022
Remember the bitcoin crash in March 2020? (-82% from the maximum of 2017). I think it’s unlikely, but it could be repeated if another macro shock occurs. I prepare myself psychologically by imagining sitting absolutely still while the market repeatedly punches me in the face.
Another month, another red candle
Sunday’s close did not go according to plan for bitcoin market watchers.
A last minute drop took away the chances of closing the week and the month above $38,500thus 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 be making things worse for bitcoin users, who have not yet seen how cryptocurrency moves away from traditional assets.
Also giving analysts a headache is the monthly chart relative to its 21-month exponential moving average (EMA).which could be suitable to disappear as support if the losses continue.
The breakout of the 21-month EMA has been a common feature of macro bearish trends for bitcoin, and February fortunately avoided a repeat.
“Tomorrow’s monthly close is critical. If we close below $37,000 (the purple 21 meter EMA) that gives us the same bearish signal as every other previous macro bear trend,” warned analyst Kevin Svenson on a chart showing the level.
Earlier, bitcoin failed to recapture two key moving averages as a pretext to retake higher resistance levels near November’s all-time highs. The result, analyst Rekt Capital warned at the time, could be a potential revision to the low of the $28,000 range.
On the positive side, Bitcoin’s 200-week moving average, a benchmark few believe will be challenged as support, crossed $20,000 for the first time this weekend.
Difficulty stabilizes the ship
Geopolitics aside, Investors have every reason to keep faith in the strength of the Bitcoin network.
Despite price pressures and uncertainty across virtually all timeframes, miners are still mining, and the hash rate and difficulty have continued to rise.
This week you can see a challenge to the status quo: the hash rate is stable, but the difficulty it will decrease for the first time in 12 weeks to take into account the latest changes.
This is not a “bad” 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.
Depending on the monitoring resource MiningPoolStats, the hash rate, meanwhile, remains above 200 exahashes per second (EH/s), a radical change from even a few months ago, when Bitcoin reached its all-time highs.
The divergence between fundamentals and price has been extensively discussed over the past year.
The question now is whether the price will follow the hash rate as in previous years.
Sentiment predicts the worst
True to his mantra, Bitcoin does not seem to have “liked” the appearance of a new armed conflict in Europe.
Leaving aside its possible functions, the largest cryptocurrency is not enjoying a sentiment boost as a result of recent events.
According to him Cryptocurrency Fear and Greed Index, a sentiment indicator that has seen increased attention in 2022, the market is rapidly becoming more nervous.
The BTC/USD pair saw a relatively small drop overnight on Monday, but it was still enough to drag the index back into its “extreme fear” territory; it went from 26/100 on Sunday to 20/100, its lowest level since February 22.
For context, local January lows of $32,800 produced a reading of 11/100 for the Fear and Greed Index.and this level usually constitutes the macro lows in recent years.
However, Commentators argued that Monday’s price decline could be a warning from the free market that pessimism will reign in the start of TradFi market operations.
#bitcoin already sending signals on Monday market sentiment? pic.twitter.com/pP1rtvJGFg
— jeroen blokland (@jsblokland) February 27, 2022
Is Bitcoin Already Sending Signals About Monday Market Sentiment?
For its part, the traditional counterpart of cryptocurrencies, the Fear and Greed Indexwas also in “extreme fear” mode last week before a recovery.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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