Bitcoin’s recent price decline has been attributed to negative newsflow, including fears of inflation, the U.S. government’s transfer of assets seized from Silk Road, and the collapse of the largest crypto-friendly bank. However, despite the downturn, sentiment analysis and on-chain data suggest the possibility of a short-term bounce.
One key factor contributing to the market’s resilience is positive accumulation among critical stakeholders, such as miners and whales. According to Glassnode data, the holdings of Bitcoin miners have been on the rise since the start of 2023, heading for a six-month peak. Additionally, the number of Bitcoin wallets with more than 1,000 BTC has increased, indicating that high-net-worth individuals and institutions are still bullish on Bitcoin.
Another positive sign is the on-chain Realized Price of BTC, which represents the average daily dollars moved through the Bitcoin network. Currently, this metric sits at $19,800 and historically has formed a crucial bull-bear pivot line. If prices slide back below this level, it could invalidate the early 2023 gains and throw the market back into a long-term bearish trend.
However, despite these positive indicators, there are still concerns about the market’s vulnerability to negative sentiment. The recent flurry of bad news and price drops caused a significant dip in CryptoQuant’s Coinbase premium index, which measures the difference in trading prices on Coinbase and Binance. Higher prices indicate stronger demand in the U.S. versus the rest of the world. The premium dipped to a two-month low on the morning of March 9 as negative news piled on.
On-chain analytics firm Santiment reported fear, doubt, and uncertainty (FUD) settling in the markets, increasing the “probabilities” of contrarian price bounces during this “period of disbelief.” The Fear and Greed Index also slipped to two-month lows of 44 but stayed well above historic bounce levels between 10 to 25. This suggests that any positive rallies are likely to be short-lived.
The upcoming Fed rate hike is another factor that traders are closely monitoring. The recent hawkish comments from United States Federal Reserve chairman Jerome Powell have amplified the market’s expectation of a 50-basis point hike in the upcoming policy rate meeting on March 22 to March 23. A higher Consumer Price Index print on March 14 could send the global markets to a risk-off environment heading to the Fed meeting later in the month.
Technically, the BTC/USD broke below February lows of $21,400, triggering a wider sell-off toward the $20,650 support level. If this support breaks, the pair could slip back into a bear trend toward 2022 lows. Consecutive daily closes below this level will be a strong bearish sign.
In conclusion, Bitcoin and altcoin prices have experienced a recent downturn due to negative newsflow and increased market volatility. However, positive accumulation among critical stakeholders, such as miners and whales, and the on-chain Realized Price of BTC suggest the possibility of a short-term bounce. Traders are closely monitoring the upcoming Fed rate hike and the market’s reaction to the CPI print, as well as the technical indicators that could signal a bearish trend. As always, investors should conduct their own research and make their own decisions based on their risk tolerance and investment objectives.