The outlook of the crypto sphere has improved dramatically since the beginning of 2023, after the prolonged crypto bloodbath in 2022. But the current rebound has been facing some resistance over the past few days. Bitcoin is currently trading under immense pressure, falling to a multi-month low. But investors believe that a short-term bounce is possible for Bitcoin as the crypto has proven over the years.
Let’s see the BTC price prediction and analysis to make an informed decision.
Is The BTC Price Falling Down?
2022 has been a tumultuous year for Bitcoin after it touched its peak in November 2021, marking an all-time high of $68,789.63. But this year came with hopes for a new bullish rally, as it saw renewed interest and a significant price rise. The crypto was hovering around the levels of $25000 the previous month. But unfortunately, crashing the expectations of crypto investors, BTC dropped almost 5% and is trading at $22,455.02 as of writing.
One reason for this significant drop in March was again the looming fear of inflation. On March 7, Jerome Powell, the United States Federal Reserve chairman, restated the market’s expectation of a 50-basis point hike in the upcoming policy rate meeting on March 22 to 23. Adding to this, the seizing of the U.S. government’s $1 billion Bitcoin transfer of assets from Silk Road again flared fears of a sell-off. Finally, the confirmation from the largest crypto-friendly bank about its collapse and plans to liquidate its crypto positions voluntarily sent BTC to fall into a multi-month low.
A Spike In Negative Sentiment Might Prevent A Bounce
Institutional investors are still hesitant to board the crypto train completely, and the primary concern for this is the extreme volatility, price drops due to negative sentiment, and security. However, some investors believe that a short-term bounce is possible for Bitcoin, the other group fears that this could be a major bull trap rather than the onset of a bull run.
From a technical perspective, the series of bad news and price drops due to macroeconomic factors has caused a major dip in the Coinbase premium index, a value that measures the difference in trading prices on Coinbase and Binance. Data from Crypto quant shows that higher prices mean a stronger demand in the U.S. versus the rest of the world. As negative news started stacking, the premium dipped to a two-month low on the morning of March 9.
Coinbase premium index. Source: CryptoQuant
A tweet from the on-chain analytics firm Santiment exposes the fear and uncertainty looming around the market, which minimizes the chances of a price bounce during this period.
😒 Traders and hodlers of top cap assets are showing skepticism after markets have failed to rally following the February 21st peak. As #FUD settles in, according to our metrics, probabilities of price bounces increase during this period of disbelief. https://t.co/Mg365PKjqX pic.twitter.com/ERqpPdkTyH— Santiment (@santimentfeed) March 7, 2023
The funding rate for BTC perpetual swaps is neutral, and there are no major liquidations in the futures market. Also, there has been a drop in the Fear and Greed Index, as it slipped to two-month lows of 44 but lasted above historic bounce levels between 10 to 25, suggesting that any positive rallies ahead could be short-lived.
However, apart from negative sentiment, on-chain data also exposes a positive accumulation amidst the most critical stakeholders, miners, and whales. Since the beginning of 2023, the holding of BTC miners has been on the rise and is now on the way to a six-month peak.
The holdings of one-hop BTC miner addresses. Source: Coinmetrics
This on-chain metric has formed a crucial bull-bear pivot line here. If the prices drop below this level, it could push aside the early 20923 gains, leaving the crypto sphere to a long-term bearish trend.
Fed Rate Hikes And Bitcoin
Apart from all the price drops, experts are concerned about the rising interest rates and tightening of monetary policies, which might stop BTC from initiating a rebound shortly. Investors are closely watching the Fed’s moves, as a higher Consumer Price Index print on March 14 could push the global markets to a risk-off environment heading to the Fed meeting later in the month. Investors and experts fear that the Federal Reserve might not be able to manage a “soft landing,” where getting inflation under control and avoiding recession is difficult.
Technically speaking, the BTC/USD fell below the $21,400 lows from February, causing a further sell-off approaching the $20,650 support level. If this support level breaks, the pair can fall back into a bear trap like that of 2022, as a straight daily close below this level point is a strong bearish sign.
BTC/USD daily price chart. Source: TradingView
The combination of negative news in this bearish macroeconomic setting has led to an immense increase in market volatility, which could lead to a short-term upside bounce. However, the market’s reaction to the CPI print and Fed’s policy rate decision in March would steer the momentum.
Why Are Investors Still Bullish About BTC?
Bitcoin is one of the most preferred cryptocurrencies and can prove itself as a hedge against inflation. Experts and investors have complete confidence in it, even amidst its volatile rally, because of its rising potential. Its history has proven that the crypto can gather momentum and initiate a future price rally.
Additionally, BTC whales have started accumulating the crypto again, and data shows they have between 1,000-10,000 BTC in their wallets. This renewed interest could be a recovery sign in the price of BTC in 2023.
Investors are well aware of the volatile nature of digital assets. Although BTC has fallen into a multi-month low, investors still believe a short-term bounce is just around the corner.
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