Will Bitcoin (BTC) Turn Bullish in Q1
Bitcoin (BTC) is again at a crossroads and looks set for both big price drops or a hike to a higher range. The confusion comes mostly from leveraged derivative markets, where long and short positions can be attacked and cause a cascade of liquidations. BTC recovered above $43,000 on Tuesday, in what is set to look like a volatile trading week.
BTC, however, may be setting the pace for the remainder of Q1, 2022, which is already halfway. For now, BTC has set its dominance over most altcoins, remaining less volatile and keeping its recent gains. BTC, Ethereum (ETH) and other assets still trade on lower volumes, with a potential for extended price slides.
The question of BTC performance at the end of February, as well as by the end of the first quarter, is raising some issues based on the next few days.
A continued price weakness is not out of the question, as the crypto market is slowing down and raising red flags based on regulation, macro risks and fearful trading. The Crypto Fear and Greed Index is hovering between neutral and fearful,
BTC quickly increased its market cap dominance to 42.5% as ETH and smaller assets took a step back. As usual, short-term pumps for some of the hotter altcoins cannot offset the price moves of big-ticket coins.
BTC Expects Fed Rate Hike in March
The markets are now only accruing leverage at a more tentative pace, not repeating the peak levels from May 2021. Liquidations are still there, but they are smaller. Options trading has taken over to de-risk some of the BTC positions.
BTC price action also expects the Fed decision at the end of March, for a potential interest rate hike. Overall, the market has turned more conservative, de-risking positions and likely not expecting significant rallies by the end of the year. The potential for a Fed rate hike and a stop on excess liquidity is starting to come into view as the first quarter moves on.
At the same time, more than 13M BTC are in long-term holding, with “whales” only spending around 175,000 BTC during the latest rally. Holding BTC for the long term is still seen as a tool against growing inflation and uncertainty.
What are the Lows Possible for BTC
One of the possible scenarios for BTC suggests the leading asset may continue to slide, reaching valuations under $30,000 once again. A significant part of that slide would be due to specific short and long positions that get liquidated, often with the potential for deliberate market attacks.
The paradox of BTC is that both bullish and bearish scenarios tend to create more leveraged positions in either direction, which end up producing the opposite result for price action.
Market conditions lead to short-term predictions derived from the levels of leverage observed on most active exchanges.
Binance leveraged trading and FTX may give some hints on which side is more dominant, but also more open to attacks.
Ethereum Ecosystem Also Slows Down
The Ethereum ecosystem is also slowing down after peak performance at the end of 2021. The effect is a mix between sliding ETH market prices under $3,000, as well as the usage of alternative networks for cheaper transactions. On Tuesday, ETH recovered to $3,025.29.
The value locked within DeFi projects on Ethereum has dropped toward $75B from above $90B and holding steady. The market cap of DeFi tokens has also dropped to $133B in notional value.
Terra (LUNA) and Avalanche (AVAX) remain among top DeFi platforms, each with significant value locked. But the drop of asset prices may raise issues with collaterals and the dominance of some DeFi protocols. The Terra protocol now relies on Anchor protocol for 55% of its total value locked.
A recent decision was made to boost the capital of Anchor Protocol and prop the project against potential volatility.
Other DeFi assets such as Binance Coin (BNB) also show weakness. BNB retreated to just above $400, though Binance Smart Chain (BSC) still carries above $12.9B in total value locked.
XRP Steps Back from Rally
XRP, the asset issued by Ripple, Inc., has taken a step to $0.79 after its recent rally to $0.89. XRP was a fixture of crypto markets before its delisting from Coinbase in 2019. Now, the asset stays behind the bullish trend, waiting for a green light and a clearer use case.
XRP slid after the completion of the Sologenic (SOLO) airdrop. Despite some expectations, XRP, for now, stays under the $1 target for February, still with two weeks to go.
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Solana is a cryptocurrency project with a radically different approach to how blockchains work. It focuses on an element which is very simple: time. It seems introducing a decentralised clock to a cryptocurrency blockchain makes it more efficient than anyone could have possibly imagined. Solana is a high-performance cryptocurrency blockchain which supports smart contracts and decentralised applications. It uses proof of stake consensus mechanism with a low barrier to entry along with timestamped transactions to maximise efficiency.
This is a specific digital coin running on a series of servers. XRP promises utility in handling cross-border transactions to compete with the SWIFT interbank payment system. Being controlled by banks, many question if it is a true cryptocurrency.