The macro situation and the price of Bitcoin

At the moment, the overall outlook for the cryptocurrency market looks very complex:

We are facing a situation where restrictive central bank policies, international political tensions and a stagnant housing market in the US could negatively affect the price of Bitcoin and the rest of the crypto market.

However, fears related to a debt crisis and dollar hyperinflation have fueled the hopes of BTC HODLers to see the leading cryptocurrency return to its all-time high.

In March, Bitcoin’s price rose by 23%while the Nasdaq is up 17% in the first quarter of 2023.

Let’s try to take stock of the situation.

The macroeconomic situation in the world: are we entering a recession?

On the macroeconomic front, there are several interesting things to report.

Starting with the hottest and also the most important situation, it is important to note that despite that inflation in the United States have reached almost uncontrollable values, it appears that the Fed’s efforts to curb the devaluation of the dollar are bearing the first fruits.

At the last FOMC, Jerome Powell announced a 25 basis point increase in the federal funds rate from the previous 4.75% to the current 5%, and at the same time made it clear to investors that quantitative easing maneuvers may continue for the next few months.

Meanwhile, the Fed has injected as much as 300 billion dollars into the markets (this can clearly be seen from the balance sheet) fueling the recent rise in US markets and the price of Bitcoin.

We will see what the upper floors’ decisions will be at the next Federal Reserve meeting. It will be interesting to see whether there will actually be a further rise in interest rates or whether a stable inflation situation will be achieved.

The situation in housing market in the United States seems to be a bit more cheering. New buyers are entering the sector and this bodes well for an improvement in the economy in general.

However, housing construction is clearly in a stagnation: High mortgage interest rates and high interest rates for applying for credit from banks cause uncertainty in the interpretation of the housing market’s future.

In the labor market, there has been a slight increase in this figure in the recent period, even though unemployment claims in the USA are still at historically low levels.

GDP has also weakened, indicating a decline in the country’s economic growth and an increase in recession risk.

These concerns are also reflected in consumer confidence: according to the latest Michigan survey, there was a slight decline in March, the first in four months.

In any case, the data on income and personal expenses from February give us hope that the Fed’s restrictive policy is making progress.

How the price of Bitcoin moves in the face of this uncertainty

The price of Bitcoin is doing relatively well despite the somewhat undecided macroeconomic situation around the world.

At the time of writing, Bitcoin’s price is $28,500, market cap is $551 billion, and volume in the last 24 hours is around $16 billion.

After the Silicon Valley Bank failure and Bitcoin’s pump that brought it just below $30,000, the price has entered a range.

Confirmation of Bitcoin’s price action will require waiting for a break from both sides, possibly with strong volumes.

The issue of volumes is proving to be of fundamental importance in the future development of Bitcoin’s price. The low liquidity of the cryptocurrency markets raises many questions about increased price volatility.

This may also be a factor that drove Bitcoin in the recent upswing.

Regardless, it bodes well for the trend in the total cryptocurrency market capitalization graph, which has clearly been on the rise since the beginning of the year.

As for the derivatives markets, it is interesting to note that BTC and ETH options on the CME have reached record high volume, suggesting that institutional activity on these types of products is on the rise.

On the crypto news front, there has been a lot of meat on the fire in recent weeks. Important news include:

• The CFTC files a lawsuit against Binance, the world’s leading cryptocurrency exchange, accusing it of violating several Commodity Exchange Act rules;
• Binance received a sting from a US court, which blocked its acquisition of Voyager Digital;
• Sam Bankamn Fried faces new charges, this time for bribing some Chinese officials;
• MicroStrategy adds new Bitcoin to wallet, to be exact 6455 BTC;
• Galaxy Digital reported a net loss of $1 billion in 2022: founder Mike Novogratz calls it “a formative year.”

Some on-chain calculations: where is Bitcoin’s price headed?

Even among Bitcoin’s on-chain calculations, we can observe indicators going in mixed directions. On-chain indicators are unlikely to affect the price of Bitcoin in the short term, but they give us a general picture of the situation that must necessarily be observed and interpreted.

Performing only and exclusively technical and fundamental analysis can be harmful in the cryptocurrency market because many really important details are overlooked.

According to Glassnode data, addresses with non-zero balances have recently increased, reaching a new record high.

This means it all over the world adoption of the Bitcoin standard increases and expands as time goes on.

In contrast, the number of active addresses and the number of daily transactions made on Bitcoin’s blockchain have decreased.

While this data in itself is not a problem for the price of Bitcoin, it is important to understand how these indicators suggest that interest rates and the number of transactions carried out on the crypto market is slightly decreasing.

This figure supports the claim we described earlier regarding low liquidity of the markets.

Fewer transactions on Bitcoin’s blockchain and fewer active addresses necessarily lead to fewer movements of funds on centralized exchanges and consequently less liquidity for traders to take advantage of.