Dehydration Point’s previous prediction stated that the Middle East geopolitical conflict would not have a long-term impact on the rise in Bitcoin prices. Recent developments have proven that the Middle East conflict has been contained and there are no signs of further escalation. Additionally, Bitcoin has shown a moderate rebound during the halving week. However, unfortunately, the macro market fundamentals have not fundamentally improved and there is a possibility of further deterioration.
Several major macro variables are moving in an unfavorable direction, which is not conducive to the external funding environment for Bitcoin. Firstly, the Federal Reserve’s interest rate cuts are unlikely in the short term. Secondly, US stocks, especially tech stocks, have experienced a major decline, indicating a shift of funds from risk assets to safe assets. Thirdly, the foreign exchange market has experienced significant volatility, and some even believe that a Southeast Asian financial crisis could occur again. In this context, Bitcoin is difficult to thrive on its own and expectations lean towards pessimism.
From a technical perspective, it is advised for investors to pay attention to the support level of 58,700.
01
Industry and Macro Factors
Recently, Federal Reserve officials have adopted a hawkish stance. Federal Reserve Chairman Powell stated on Tuesday that recent data has clearly not given us confidence that inflation will move towards the central bank’s 2% target. The President of the New York Federal Reserve stated that if the data shows that the Federal Reserve needs to raise interest rates to achieve its goals, then the Federal Reserve will raise interest rates. The President of the Atlanta Federal Reserve also expressed openness to raising interest rates if US inflation rises. Based on this change in attitude, the window for the Federal Reserve to lower interest rates in the short term has effectively closed.
Last week, tech stocks, which are closely related to Bitcoin, generally fell. The US tech stocks represented by the “MAG 7” fell below the 50-day moving average for the first time since October last year. The market value of MAG 7 has declined by over $1 trillion from its peak a week ago. Among them, Nvidia experienced a 10% drop in a single day on Friday.
A report released by Michael Hartnett, a strategist at Bank of America, suggests that the strong performance of the US economy and stubborn inflation have reignited concerns in the market about “higher and longer” interest rates, and investors are withdrawing funds from the stock market. Data from EPFR Global shows that investors redeemed $21.1 billion from equity funds in the two weeks leading up to last Wednesday, the highest amount in two weeks since December 2022, while the bond market received a net inflow of $5.7 billion.
In the foreign exchange market, currencies of various countries have experienced significant declines relative to the US dollar. Senior officials from Japan and South Korea have expressed “serious concerns” and conducted verbal interventions.
These are all macro-negative factors, while the industry news has performed relatively well. Despite the net outflow of Bitcoin spot ETF funds for five consecutive days last week, Bitcoin experienced a significant increase in value during the halving period. In addition, the Hong Kong Securities and Futures Commission has officially approved the Bitcoin Ethereum spot ETF. However, Bloomberg estimates that the scale of funds it brings is relatively small, expected to be only $500 million.
02
Technical Analysis
Last week, BTC maintained an overall relative weakness. In our analysis last week, we emphasized the direction choice between 67,883 and 60,000. If it breaks above, it would indicate strong long positions, and if it breaks below, short positions would emerge. On Friday last week, the market broke below, indicating opportunities for short positions. Currently, attention should be paid to the upward momentum near 67,883, and if it can break through, opportunities for long positions can be sought. In addition, traders also need to pay attention to the support near 58,700. If the price falls below this area, there will still be opportunities for short positions.
03
On-chain Data
According to Coinglass data, after continuous outflows of Bitcoin ETF funds, there has been a net inflow. However, from the trend, the net inflow of Bitcoin funds is weakening, indicating that institutional funds are currently adopting a wait-and-see attitude.
Glassnode data shows that Bitcoin’s on-chain transaction fees have risen rapidly, which is largely due to the recent launch of Bitcoin ecosystem projects such as Rune and Merlin, indicating relatively high activity of funds. Overall, there are signs of continued flow of funds into the Bitcoin ecosystem.
Overall, Bitcoin has experienced a certain rebound recently due to factors such as the halving and the gradual launch of key projects in the Bitcoin ecosystem. However, it is still necessary to further monitor the sustainability of Bitcoin’s on-chain activities. However, due to the recent tense geopolitical situation, Bitcoin has been significantly affected. Although institutional funds have flowed in to some extent, their scale is still relatively small, and market sentiment remains relatively cautious.
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