And it continues sideways. Despite halving and Bitcoin ETFs, the leading cryptocurrency is not moving. At the time of writing, Bitcoin (BTC) is trading at USD 61,310, 16 percent below its high.
Market sentiment has cooled accordingly. The Relative Strength Index (RSI) is slowly returning to neutral territory at 64 out of 100 points. The RSI is a so-called momentum index. At low values, Bitcoin is considered oversold and a trend reversal becomes more likely.
But the current market environment could also bring opportunities. In the medium term, the macroeconomic situation indicates the biggest Bitcoin bull run of all time. Or, to put it in the words of hedge fund manager Raoul Pal: Welcome to the Banana Zone.
It is not surprising that Bitcoin is trading bearishly these days. Because, as we show in the current Bitcoin Report, the macroeconomic situation is worse than it has been for a long time.
High interest rates make fixed-income securities more interesting than non-interest-bearing, speculative stores of value such as Bitcoin.
Global liquidity M2: Why Bitcoin is moving sideways
The sideways trend is based on the current low global M2 liquidity.
After the Covid stimulus, inflation had risen to double-digit percentages in the US by mid-2022. A reaction from the Fed was desperately needed. Meanwhile, M2 has risen minimally, which raises quiet hopes. More on that later.
“This was the biggest decline in the money supply in the US since the Great Depression,” says Dr. André Dragosch, Head of Research at crypto fund provider ETC Group to BTC-ECHO. That’s bad for Bitcoin.
The only plausible reason why Bitcoin has not completely crashed given the market environment is ETFs. The index funds from BlackRock, Fidelity and Co. were – hold on – the most successful ETF launch in stock market history. By the time we went to press, 15 billion (!) USD had flowed into the products.
But things are already improving. After all, global liquidity is likely to increase in the coming months. The ECB has already lowered key interest rates and the Fed is also holding out the prospect of a so-called pivot. After all, the USA can hardly afford the high debt burden in the long term at the current interest rate of 5.5 percent, and important economic indicators such as the Purchasing Managers’ Index (PMI) published by the Institute for Supply Management is at 48.7 percent. A value below 50 signals falling industrial activity in the coming months.
A more expansionary monetary policy would be good for Bitcoin – and gives justified hope that the bull run will continue in the coming months.
In the current Bitcoin Report, we take a closer look at the macroeconomic situation. Here you can also read why this bull market is far from over.
This might also interest you