Evaluating Bitcoin’s Price Trajectory If Regulators Dial Heat on Crypto

• Bitcoin may face regulatory headwinds in the coming weeks.
• Whale and institutional demand for Bitcoin is seeing a slight recovery.

Bitcoin had a strong start to the year, but that sentiment could soon change. Especially now that the fear of a recession threatens to tear the well-known bandage off the recovery market. The risk of regulatory-induced R&D can also contribute to a less exciting result than expected.

Bitcoin experienced a bit of a slowdown in demand in the last few days before the FOMC announcements. The same observation remains despite a favorable interest rate increase. One possible reason for this is that the threat of a regulatory apocalypse is now closer when Congress resumes.

Ron Hammond of the Blockchain Foundation noted in an interview that stricter regulatory measures are to be expected. Regulators are now more vigilant after the FTX crash. FTX hearings are expected to begin soon, and this could encourage Congress to push for a rulemaking.

Regulators are already cracking down on banks

Many mainstream banks have taken a softer stance on cryptocurrencies over the past two years. This includes allowing customers to buy or sell cryptocurrencies directly through their bank accounts. This may no longer be the case now that banks have been advised by regulators to avoid all cryptocurrency trading.

The FTX debacle has already affected liquidity, and closing off access through the traditional banking system could cause a crypto demand shock. These concerns may be why Bitcoin bulls failed to rally strongly after the FOMC announcement.

The demand side has certainly shown interesting observations in recent days. For example, addresses with balances greater than 1000 BTC fell by a significant margin between January 25th and February 1st.

Source: Glassnode

The same metric appeared to be fluctuating at press time, and if this continues, it will symbolize a stronger bullish move. Some demand for whales and institutions seems to be on the rise. For example, Bitcoin Purpose ETF holdings finally started to rally in the second half of January.

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Bitcoin’s currency flows fluctuated towards the end of January in line with the increased uncertainty. However, the first three days of February led to some improvement. Furthermore, currency outflows outweighed currency inflows at the time of writing. This confirms that buying pressure is increasing.

Source: Glassnode

The current environment in the market emphasizes uncertainty and concern about the next move. Some expect BTC to continue rallying while others see the January rally as a false sign that the bull market has begun.

On the plus side, the current concerns may disappear if regulators implement crypto-friendly regulations.