Summary:

Technical: $35,000 key BTC support and $45,000 resistance on watch

Markets: Expect high volatility in the following week as the market reacts to further developments in Ukraine

Macro: Uncertainty of the amount fed will raise interest rates and effects on the markets

Recommendation: Widen the price range of the Grid Trading bot and reduce the number of orders to capture the expected volatile trading range

Important News:

● February 24: Russia invades Ukraine after President Putin announced Russia will launch a “special military operation”

● February 25: US and Allies enact sanctions on Russia in response to the invasion of Ukraine

● February 26: US and EU move to block certain Russian banks from SWIFT

● February 27: President Putin puts nuclear deterrence forces on high alert

● March 2: EU blocks 7 of Russia’s largest banks from SWIFT

● March 4: Nonfarm payrolls report show 678k jobs added vs 400k expected

● PCE (Personal Consumption Expenditures) data is an inflation gauge for the Fed. It is up 5.2% highest gain since 1983

Bitcoin bounced strongly off the $35,000 support level after the initial drop due to Russia’s invasion of Ukraine. Prices largely held up for the early part of the weekend. However, as the US and EU nations look to block certain Russian banks from the SWIFT (international banking) messaging system, President Putin puts nuclear forces on high alert, causing bitcoin and other cryptocurrencies to fall in reaction. Later in the day, Ukraine announced it had agreed to hold peace talks with Russia to end the invasion. Bitcoin was trading around $41,200 at the time of publishing and is up 10% on the day.

Our View:

Due to various factors, our view is the crypto market will lack direction until there is more clarity from the Fed and the Ukraine situation in the coming weeks. Through analysis of supply and demand zones, it became apparent there is a high probability that bitcoin’s price will fluctuate between a low of $30,000 to a high of $49,000 (read on for our analysis).

With the number of unknown factors, it will be hard for the crypto market to show actual direction. You might be tempted to just stay on the sidelines and wait out this period of volatility. But this type of environment is perfect for the Grid Trading Bot to capture the up and down swings caused by the macro events.

Recommendation:

Our recommendation is to use the Grid Trading Bot to take advantage of volatility. Due to the lack of real direction, it might be better to set a lower range of ~$30,000 and an upper range of ~$50,000, with orders spread over 50-80 grids. The lower number of grids makes the orders more spread out and perform better in volatile environments. Be sure to use proper position sizing and place stop orders if that is part of your strategy. Always remember to manage your risk. If bitcoin breaks under $27,500 meaningfully and holds under that level, it will indicate further weakness.

Bitcoin's daily volatility in the past 60 days is 3.17%. Approximately an average daily range of $1,100. 

Technical Analysis:

For bitcoin, $35,000 is a crucial level that saw strong support in the past. Last week, bitcoin again came to test this level, and buyers stepped in to support the price. However, we will need to see continued buying and prices moving away from $35,000 for confirmation. If this level breaks, the next significant support level is $30,000. If bitcoin breaks that level, then it will signal a more bearish environment and show the local top might be in for bitcoin. There is also very weak market structure in the $20,000 to $30,000 range, as prices did not spend much time there.

Data provided by on-chain analytics firm Glassnode shows many short-term bitcoin holders are underwater. These short-term holders bought at an average price ranging between $40,000 - $50,000. The prices that saw the most volume was between $43,000 - $49,000, which will act as near-term resistance. Research shows short-term bitcoin holders are most at risk of selling their position and will most likely act as selling pressure as prices begin to reach their entry price.

Mainstream Opinions:

Many believe bitcoin’s bull run has a close connection with its halving process. Halving is the event that cuts the rewards miners receive in half. It can be looked at as reducing the production of bitcoins, thus causing a deflationary effect. Bitcoin reached its all-time high of $68,000 in 2021, about one year after halving in 2020. The same thing happened in 2017 when Bitcoin reached its all-time high after halving in 2016. Following this trend, we see that the entire cryptocurrency market ends up in a bear market approximately two years after every halving date. The bitcoin price is typically range-bound until the next event, this time in 2024. However, there is no guarantee that this trend will continue.   

Unique view:

America and the EU’s move to exclude Russian banks from SWIFT will put heavy pressure on the Russian economy and might even influence Putin to end the war. However, no one knows what effects this weaponization of finance could have in the future.  

Other countries will see the dependence of their economies on SWIFT. This incident with Russia showed how it could be weaponized and used to collapse an entire country’s economy.

I believe this will be very bullish for the crypto landscape and further promote the need for a decentralized financial system that no country can control.

Guess what? Bitcoin is the original decentralized crypto-currency, so it stands to benefit the most from this possible shift in sentiment.