Kategorie: Bitcoin News

• Bitcoin and crypto prices fell as markets reacted to January PCE data.
• The Fed’s favourite inflation measure came in hot, jolting markets lower with S&P 500 declining nearly 1.4% and Dow dropping about 400 points.
• Crypto analyst Rekt Capital says BTC price remains in positive territory as long as bulls hold support above $23k.

Bitcoin price continues to struggle after the rejection from the $25k resistance, but today’s dip comes as the market reacts to hotter-than-expected Personal Consumer Expenditure (PCE) data.

As stocks got whacked on Friday, with the S&P 500 falling nearly 1.5% and the Dow Jones Industrial Average dropping 400 points, BTC price retreated under $24k to hit lows of $23,130 across major exchanges.

Crypto, Wall Street drops on CPE data

The CPE is the Federal Reserve’s most preferred inflation measure and sentiment has shifted on the latest data release as investor jitters fill up again. 

The Fed uses the CPE price index to assess how sharply prices have risen within the US economy, and data shows prices spiked 0.6% in January and 5.4% year-over-year. Core CPE also came in hot, at 4.7% against the forecast 4.3% to suggest inflation remains an issue.

“Inflation remains too high. We’re going to have to do more to get back to 2%,” said Cleveland Federal Reserve President Loretta Mester. “I see a little more impetus in the inflation measures than my colleagues. We’re going to have to bring interest rates above 5% and hold there for a time,” she added during an interview with CNBC.

Bitcoin price outlook

The reaction on Wall Street also cascaded into the crypto market, with BTC price declining below a key support line recently highlighted as a “confluent support zone.” The uncertainty around the Fed’s interest rates saw most stocks scorched in early trades, a scenario also replicated in crypto with Ethereum dropping below $1,600.

For Bitcoin’s short-term price outlook, popular crypto trader and analyst Rekt Capital says bulls could remain in control if BTC holds above $23k. However, a bearish outlook would materialize if price breaks lower.

“BTC Weekly retest of the confluent area that is the Lower High and Monthly Range High resistance is now in progress. Price needs to hold here for the retest to be successful. However, Weekly Close below this area would be a bearish sign,” the analyst noted.

A failed #BTC Weekly retest of ~$23400 as support would mean that price remains inside the Monthly Macro Range

Let’s see how the Monthly Closes

1M Close above ~$23400 -> likely range breakout

1M Close below -> $BTC stays in & range & could dip lower in range#Crypto #Bitcoin pic.twitter.com/xTAqH7pVlm

— Rekt Capital (@rektcapital) February 24, 2023

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Key Takeaways

• 11.8% of the Bitcoin supply is currently on exchanges, the lowest mark since 2017
• Supply of Bitcoin on exchanges has been consistently falling since March 2020, when crypto bottomed ahead of the explosive pandemic bull run
• Originally, people pulled Bitcoin to participate in vibrant crypto ecosystem, with high volumes and activity and much scope for yield
• Today, volumes and interest have fallen, but pattern of Bitcoin fleeing exchanges has continued, albeit for different reasons
• Bitcoins leaving exchanges in recent months are likely due to fears over security and transparency, heightened after FTX collapsed

“Not your keys, not your coins”. 

One of the oldest sayings in crypto. And after a year that saw one of the biggest exchanges around shockingly gamble away customer assets in secret, many will wish they had paid it more attention. 

Now, people are listening. Although in truth, this has been happening all throughout the pandemic. The balance of bitcoins on exchanges is now down to 2.27 million – that is the lowest mark since March 2018, a month which saw “God’s Plan” by Drake being played on the radio over and over and over and over again. 

The mark is even lower when compared to the overall supply. There is currently 11.8% of the Bitcoin supply on exchanges. This is the lowest mark since December 2017. 

Crypto fans will remember December 2017 as the month that Bitcoin went absolutely bananas. I remember exactly where I was when I saw that Bitcoin had breached the $20,000 mark for the first time; it felt like a seminal moment. 

It marked the top, incidentally, with the orange coin at $7,500 seven weeks later. Within a year, it wasn’t far above $3,000. It was a long and barren bear market with fortunes not turning around until COVID hit in 2020. 

Where is the Bitcoin going?

I say “not your keys, not your coins”, but this isn’t the only thing driving the movement of coins off exchanges. 

As the above charts show, the Bitcoin supply on exchanges has been coming down since March 2020. This is also the month that COVID kicked off. Since I’ve been in crypto, I also believe it was the scariest time of all – Bitcoin plunged from close to $10,000 to $5,000 in a gruesome 48 hour stretch as markets around the world tried to figure out what exactly this COVID-19 thing was. 

But after this, the bull market kicked into gear. So, why has Bitcoin on exchanges been falling throughout this period?

The truth is, ironically, that it could be for the exact opposite of the matra behind “not your keys, not your coins”, at least in part. This is due to the rise of crypto lending platforms during the bull run – firms like Celsius, BlockFi, Voyager Digital and so on.

These platforms offered a nice yield on Bitcoin, and this attracted billions of dollars of inflows. Now, you may notice one thing about those names: today, they are all bankrupt. Which means that, obviously, coins currently leaving exchanges in recent months are for other reasons. 

So there could be a dual explanation here: during the bull run, coins were leaving exchanges for yield on centralised platforms. Or they were leaving exchanges for DEXs, or other destinations. Crypto was booming at this time; there were no shortage of things to do or yield to earn. 

Today, however, volumes have been decimated. Looking at total value locked within DeFi, it is down to $50 billion, having been up to $180 billion in December 2021. That is a fall of 72%. Simply put, prices are down, volumes are down and interest in general is down. 

This fallen volume and interest have likely reduced the pull of Bitcoin off exchanges. But this drop may have been replaced by people pulling Bitcoin at a similar rate, but for an entirely different reason: to be secure, and to send to cold storage. You can thank Sam and the various other scandals for this. 

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• Stacks blockchain was designed to bring smart contracts and dApps to Bitcoin.
• Stacks is providing a way to transfer assets to and from Bitcoin using smart contracts.
• Its releases today advance its aim of making Bitcoin a more programmable smart contract hub.

The price of STX, the native token of the Stacks blockchain, has risen by more than 143% over the past week besides today’s surge of 31.73% at press time. The reason for today’s Stacks price surge is mainly because of two major whitepaper releases by the Stacks blockchain as it continues with its goal of making the Bitcoin blockchain a more programmable smart contract hub.

Stacks’ is a Layer-1 blockchain solution that aims works on bringing smart contracts and decentralized applications (dApps) functionality to the Bitcoin blockchain. Bitcoin by design is a proof-of-work (PoW) blockchain with no in-built smart contracts capabilities.

The two Stacks whitepapers

The first whitepaper release is titled “sBTC whitepaper” while the second whitepaper release is titled “stacks whitepaper.”

The sBTC whitepaper introduces a newly proposed asset referred to as sBTC that will act as a trustless two-way Bitcoin peg to allow for the swift transfer of assets to and from the Bitcoin blockchain. In essence, the sBTC will allow Bitcoin to become a more secure Web3 hub by enabling trustless writing to Bitcoin and the movement of Bitcoin in and out of Bitcoin layers. The transactions will be secured using 100% of Bitcoin hash power.

The sBTC complements Stacks 2.0 which introduced “read” access to the Bitcoin protocol.

The stacks whitepaper (Nakamoto Release) adds important capabilities to the Stacks protocol to enhance its power as a Bitcoin layer. The whitepaper introduces a number of changes that are to be made to the Stacks protocol in order to enable the trustless functionality of the newly proposed sBTC asset.

While the release of the two whitepapers is a major milestone for Stacks, it is also a major boost for the Bitcoin economy. sBTC will introduce a new era of Bitcoin applications, which will in turn unlock $300B+ within the Bitcoin ecosystem in latent capital for Web3 and also accelerate the growth of the Bitcoin economy.

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• Morgan Stanley’s Mike Wilson is seen as one of the best analysts in Wall Street.

• He warned that the S&P 500 is ripe for another 21% crash.

• If this view is valid, we could see BTC prices crash as well.

Bitcoin price dipped to about $24,000 as a somber mood engulfed the stocks and cryptocurrency industry. After rising to a high of $25,373 during the weekend, the BTC/USD price has struggled to retest it this week. And now, one of the best sell-side analysts in Wall Street, has issued a blistering warning about the market.

Morgan Stanley’s Wilson warning

In a note on Tuesday, Mike Wilson, the Chief Equity Strategist at Morgan Stanley, warned that the S&P 500 could crash by another 21%. If this happens, it means that the index could crash from the current $4,000 to about $3,140. 

Wilson noted two main things that could push the S&P 500 index much lower in the near term. First, there is a reset of expectations about the Federal Reserve. The argument is that investors were expecting the Fed will start pivoting soon. 

However, the reality is that recent data point to more hikes this year. Inflation remains stubbornly high while the unemployment rate has fallen to a multi-decade low of 3.4%.

Second, corporate earnings have been a bit weak. Companies like Goldman Sachs and Home Depot published relatively weak financial results. According to FactSet, S&P 500 constituent companies have had a blended growth of -4.7% in the quarter, the worst since 2020. 

Further, with the bond yield being highly inverted, there is a likelihood that the US will go through a major recession. Stocks tend to underperform in such a period. Mike Wilson is not the only analyst worried about stocks. In a widely-read report, Jeremy Grantham warned that the S&P 500 could crash to about $3,200.

Implications for Bitcoin prices

Mike Wilson did not mention Bitcoin prices in his note. He did not also mention cryptocurrencies in general. However, if his warning materializes, the fact is that it will have serious implications for BTC and other cryptocurrencies.

In the past few months, Bitcoin and stocks have had a close correlation. A close look at the data shows that BTC and S&P 500 have a correlation coefficient of 0.91. A correlation of 1 or close to 1 is usually a sign that the two assets are closely correlated. 

Therefore, if the S&P 500 crashes by 20%, there is a high possibility that Bitcoin price will drop further than that. As such, while it is too early to predict whether Mike Wilson will be right, it makes sense to start taking profits.

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• Bitcoin price broke above $22,500 to new highs above $25,000 amid the hunt for short stops and liquidations.
• The move to $25k resulted from short liquidations of over $155 million.
• While price could retreat to $24k, Bitfinex analysts say recent price movements could be indicative of a bottom.

Bitcoin price rose above $25k briefly before slipping back under the key psychological and technical area. 

According to analysts at crypto exchange Bitfinex, the retreat to this week’s lows comes after a 10% upswing and a green weekly candle. However, the benchmark crypto did not hit a crucial daily candle close at that zone.

Even then, it is likely the price movement is another major step towards “the latter stages of a gruesome bear market,” the analysts noted in a report.

BTC spike to $25k fueled by massive liquidations

Bitfinex analysts also suggest that Bitcoin’s breakout from the $22,500 price level to highs above $25,000 was fueled by the massive liquidations recorded over the past few days.

Commenting on BTC price outlook and what could lie awake in coming weeks, they said in a statement shared with CoinJournal.

“Over the past two weeks, the BTC price has been hunting both over-leveraged long positions, as well as liquidating over-eager shorts of over $155 million. It reached an eight-month high of $25,000 in the process. Another sharp but short-lived pullback caught out some short-term bullish speculators off-guard who were betting on a push to the upper $25,000-$26,000s on Thursday, February 16th, as evidenced by a spike in long position liquidations on that day. Profit-taking in the wake of the recent rally and a stop-run on those who had gotten overly aggressive chasing the upside might well send Bitcoin back below $24,000 in the week ahead.”

On what happens next, the analysts say price action as has played out recently has historically, resulted in ranged price movement. This is due to the action that has seen both longs and shorts have been simultaneously wiped off.

“The most probable move going forward is to scale out of positions partially and wait for the range to form without a strong directional bias,” they explained.

In a tweeted prediction for Bitcoin price, YouTuber and crypto analyst Sheldon The Sniper says Bitcoin could go to $28k or revisit support at $21k. He shared the outlook above as BTC price continued to hover around $25,683 at 2:15 pm ET on Tuesday.

$BTC update
1Hour chart forming a flag and this is a crucial level for the market
We have a support and resistance trend and ultimately which ever trend we close outside of will give us the next direction . Break of resistance we go to 28K
Break of support we go to 21K pic.twitter.com/1BdbR0wpjR

— Sheldon The Sniper (@Sheldon_Sniper) February 21, 2023

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