The price of Bitcoin and altcoins continues to be affected by inflation concerns and a general feeling of trepidation over the future of global economic growth. Currently, the Crypto Fear and Greed Index is still in the ‘fear zone’ where it has been since December 1.
Crypto Fear & Greed Index. Source: Alternative
Despite a brief rise in prices following the FOMC meeting, where Fed Chair Jerome Powell stated that interest rates would remain low, overall sentiment in crypto markets continues to decline, suggesting that 2021 could be a bearish year.
Macro concerns could cause a drop in BTC prices
A Delphi Digital report recently noted that Bitcoin’s price (BTC), which can be closely tracked by sentiment changes during market downturns, can sometimes take time for the trend reverse.
BTC price vs. Crypto Fear & Greed Index. Source: Delphi Digital
Delphi Digital stated that the technical setup for Bitcoin is “very poor”, especially after the price dropped below the 200-day exponential moving mean. They are currently testing the 200-day simple moving mean.
Similar setups were observed following the May 2021 major market pullback. It took another two months for BTC to find a local bottom.
BTC/USD vs. the 200-day EMA & SMA. Source: Delphi Digital
The increase in transactions of stablecoins coincides with the market pullback that occurred in May, as well as the volatility and market conditions. The volume of transactions on Dec. 14 jumped to $57 billion, while the daily average was between $10 and $20 billion.
Daily stablecoin transfer volume. Source: Dune Analytics
Delphi Digital warned that Ether (ETH), and BTC (USDT) could see similar spikes in stablecoin volumes during the May pullback.
Delphi Digital said,
“Given these facts, the most likely path forward would be more choppy/sideways pricing action heading into year end, but any major risk-off or volatility spike that punishes risks assets would likely drag down on BTC as well as the wider crypto market.”
Related: Historical accurate’momentum indicator’ hints at possible Bitcoin breakout ahead
The market is preparing for a rally during Q1 2022
Jarvis Labs, a crypto analytics firm, expressed a similar expectation about choppy markets. They also pointed out early “bottoming” signals based on a wide range of data.
BTC/USD vs. 30-day returns. Source: Jarvis Labs
Jarvis Labs presented evidence of retail traders buying the dip, as well as other signs that point to whales building in the current range. However, analysts also noted that $53,000 is the realized price for the short-term holder and advised traders to be cautious until this level is flipped.
Jarvis Labs stated, in summary, that $42,000 is the current local bottom for Bitcoin, but warned that $53,000 needs to be recovered soon.
The total cryptocurrency market is now worth $2.233 trillion, and Bitcoin’s dominance rate of 40.6%.
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Eileen Wilson –Technology and Energy
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