May 1, 2023
Bitcoin Activity at Record High as Volatility Stirs
Dear Subscriber,
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| By Marija Matic |
“It’s gonna be May!”
Sorry, I couldn’t resist the classic NSYNC reference. Especially as the move into the new month means a shift in what to expect from the crypto market.
Let me explain …
Bitcoin (BTC, “A-”) was making headlines with its trading activity throughout April. Last month, BTC traded between the $27,000 to $31,000 range, with yesterday’s monthly close above the important 21-day exponential moving average level for the first time in a year.
However, after making a green monthly close above $29,200, the BTC price experienced a correction below this level — another indication of what we’ve been anticipating for the past few weeks: As we move forward, volatility is expected to continue due to the anticipated interest rate hike from the Federal Reserve. The CME group is showing an 89% probability of a 25-basis-point increase.
The upcoming Federal Open Market Committee meeting is scheduled for later this week, making it an interesting time for BTC traders and investors to keep an eye on the market.
In addition, the European Central Bank is also scheduled to announce its interest rate decision this week.
Of particular interest to BTC traders will be the comments from Fed Chair Jerome Powell, which may have recently been more influential on the markets than the actual interest rate hikes themselves.
All eyes will be on Powell's remarks as traders look for clues about the future direction.
Meanwhile, the BTC/USDT four-hour chart shows BTC is below support at $28,900 (marked in blue), but still trading in the range (between the purple lines):
There is the descending trendline resistance (yellow), which BTC has been attempting to break since mid-April. A break above it would be bullish for the largest cryptocurrency.
Now, there is reason to doubt the likelihood that a break above is even possible. At this stage, it can be argued that buying pressure has dried up too much to push the price much higher.
But that isn’t set it stone. Buying pressure can be reignited at any moment as two key metrics of Bitcoin show growing adoption and network expansion:
1. There is a surge in Bitcoin Active Addresses after two years, suggesting growing adoption. Users are using it more for payments, trading, or other purposes, which leads to a higher number of active addresses. This usually attracts more participants and creates a positive feedback loop.
2. Transaction count is also rapidly increasing, with the record high numbers of transactions on the Bitcoin blockchain peaking yesterday, likely related to the demand for NFTs called Inscriptions.
Not to lag behind in bullish fundamentals, Ethereum (ETH, “B”) has also just hit a record number of holders who have at least 0.01 ETH, despite prices being far from the all-time high.
Meanwhile, there is a decline in Bitcoin reserves at American exchanges, according to CryptoQuant data. This means that Americans may be increasingly holding Bitcoin on offshore exchanges or in personal wallets.
One reason can be found in the recent hostility of the U.S. Securities and Exchange Commission. The regulatory demands on the exchanges and hostile remarks related to the crypto industry may have eroded American investors' trust, causing them to move their coins to offshore exchanges or personal wallets.
Regulators should be taking note with a hint of concern. If they continue on this path, regulators risk the U.S. falling behind the rest of the world when it comes to crypto, if policymakers continue to exert undue pressure on the industry.
Notable News, Notes & Tweets
• Mastercard (MA) is teaming up with Solana (SOL, Not Yet Rated) and Polygon (MATIC, “B”) on new crypto credential standards to build credibility in the crypto sphere.
• Genesis, Digital Currency Group, Creditors Committee and Gemini agreed to start a 30-day mediation process to drive to a final resolution. If DCG is unable to pay and/or restructure its debt of $630 million, it risks defaulting on its obligations.
• Senior macro strategist at Bloomberg Intelligence, Mike McGlone, remains bullish on Bitcoin in the long run and sees it as “global digital collateral.”
• Binance offers Sui (SUI) farming on Binance Launchpool as of May 1. Users are now able to stake their Binance Coin (BNB, "C”) and True USD (TUSD, Stablecoin) into separate pools to farm SUI tokens over two days. And 40 million SUI, or roughly 0.4% of the total token supply, will be distributed on the platform to BNB stakers and TUSD stakers. Sui mainnet will launch on Wednesday.
What’s Next
Currently, BTC is hovering in uncertain territory, and a confirmation of a bullish trend would require a breach of the declining trendline with a candle close or a retest above it. So naturally, the current levels of interest are at $27,800 and $29,100.
A deviation or break of these levels can be a trigger for many traders. And considering that the FOMC rate hike may serve as a catalyst for increased volatility, all eyes will be on the meeting minutes the moment they’re released.
But as long as BTC stays above $27,000, the outlook remains bullish.
Glassnode data shows that HODLing continues to be the primary dynamic among longer-term investors, with large swathes of coins continuing to mature.
This suggests that much higher prices are necessary to entice seasoned investors to spend.
On the other hand, there has been a surge in the number of Bitcoin Active Addresses and an increase in transaction counts, indicating growing adoption and network expansion.
These key indicators suggest that the future of BTC is bright, with potential for further growth and market penetration.
Seasoned traders and investors know this potential volatility is just par for the crypto course. Still, it makes entering the crypto space intimidating. That’s why my colleague Chris Coney has developed a strategy that uses crypto’s volatility to earn money in most any kind of market.
With it, he and his members were able to smoothly navigate the FTX crash and the temporary depeg of USD Coin (USDC, Stablecoin), all while their crypto worked for them.
Their most conservative, low-risk exposure position currently has an 18% APY. That’s double the yield currently available on high-yield junk bonds — without the risk of failures and defaults.
Chris is revealing this exciting strategy in his Superyield Conference tomorrow at 2 p.m. Eastern. And it’s completely FREE for Weiss Ratings Members, like yourself!
All you have to do is register now.
Best,
Marija
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