Bitcoin (BTC) Retreats: How Far Will Prices Dip
Bitcoin (BTC) fulfilled the expectations of retracing its recent rally, moving under $45,000. The retreat immediately spread to altcoins, affecting even the ones that rallied strongly before.
BTC continued the slide ahead of the weekend, crashing to $44,716.68. Almost all other assets retreated by 3-6%, a relatively small move for the crypto market. Even Waves (WAVES) abandoned its all-time high above $60. BTC now awaits the next potential direction, not entirely abandoning predictions of more possible dips.
Was BTC Affected by FUD
The most recent price drop coincided with talk of proposals to monitor even small crypto transactions in the European Union. Currently, crypto is a tool to move funds above and beyond the permissions of AML restrictions. A European Union commission voted on a proposal to limit the amount of digital coins and tokens that could be sent to wallets.
The proposal targets so-called “non-custodial wallets”, which are simply the widely used cryptocurrency wallets.
Most crypto transactions are not anonymous, but they are pseudonymous. There is no tool to limit the creation of new wallets, the generation of addresses or to limit the transactions. In the past months, law enforcement has attempted to task wallet creators with limiting their users. But so far, no wallet provider has proposed KYC procedures or any tools to limit new users.
The Bitcoin protocol thus once again shows it is, for most purposes, censorship-resistant. The only addresses that face limitations are the ones flagged to belong to hackers. They can still move the coins, though they may expect to have the transactions immediately flagged again, so they can never exchange the coins to another asset.
Is a Bearish Scenario Still at Play
BTC is currently trading with a growing share of futures activity. In general, 2022 was still setting expectations for a new all-time high. However, short-term shifts and downturns may still be possible. BTC met resistance above $48,000, repeating a potential bearish scenario.
It is also possible for BTC to drift sideways, potentially inviting more accumulation. BTC on exchanges keeps dropping, with more coins locked away as collateral or long-term reserves.
The supply of new BTC is also quickly ending, with only about 2M coins left to mine.
The dwindling number of coins also continues the trend of scarcity and possibly a supply shock. While $1.2B in BTC went on exchanges, about twice as many coins were withdrawn. This time, large-scale transactions to exchanges fail to sway the market as much.
Lightning Network Keeps Growing
The initially experimental Lightning Network keeps expanding and becoming more reliable. The network’s capacity has grown with more interconnecting nodes.
The latest exchange to adopt the Lightning Network is Kraken, the European market operator. Lightning Node transactions are also pseudonymous and rely on coins stored in nodes to fulfill the operations between channels.
BTC Completed Short-Term Capitulation
Almost all measures of BTC sentiment are bullish, with a warning that the actual price action may take longer to play out. Newer buyers have already ended the panic-selling, which is also getting weaker with each price drop.
For now, the scarcity and expectations for a hike to new highs have not translated into one immediate rally. The March closing is still expected to be in the green, though by a relatively small margin. In a turbulent month, BTC moved between highs above $48,000 and lows under $37,000.
The third quarter is also set to end with a small net loss compared to the start of 2022. During that time, altcoins were chosen for their more active appreciation, though almost no assets managed to counter the market trend.
Only a few exceptional altcoins moved up as anomalies, in addition to the three most active DeFi protocols – Solana (SOL), Terra (LUNA) and Avalanche (AVAX).
BTC dominance is again at 41.6%, while Ethereum (ETH) increased its weight to 19%. ETH managed to hold just under $3,300, pulled down by the sudden crash of BTC late on Thursday.
In the past week, the Crypto Fear and Greed Index moved between 40 and 52 points, ending up with a neutral attitude. The current sentiment follows a series of short liquidations when BTC rallied to $48,000.
The latest price move, as recorded by Coinglass, saw 88.5% liquidations of long positions on the Binance exchange. Again, long liquidations predominance affected all major futures exchanges, with $28.5M in BTC liquidated in the past day.
BTC closed in the green on most days in March, but the latest price move caught long traders by surprise, breaking the expectations for an immediate rally back above $51,000.
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