Strong Headwinds Send Crypto Markets Spiralling; But Investors Still Hodl-ing Strong

Geopolitical tension and doubts surrounding Fed’s March policy meeting have sent crypto reeling, effectively plunging the markets into a state of fear

13:53 23 February 2022

Amid rising geopolitical tensions, the cryptocurrency market fell around 6% in just the last day alone. It was a sea of red yesterday in the crypto market: Bitcoin (BTH), the leader of the pack, shed more than 5% and other leading crypto currencies namely Ethereum (ETH), Solana (SOL), Cardano (ADA) and Ripple (XRP) tanked at a similar rate. The meme coin Dogecoin and its popular spinoff Shiba Inu were not immune to the sharp correction either, both dropping significantly during the period.

 

Crypto Facing Strong Headwinds

The cryptocurrency market might be in for a rocky ride where price movements could be tumultuous and heavily impacted by strong macro headwinds such as Fed’s decision on quantitative tightening and the Eastern Europe conflict.

 

Having seen off the threat posed by the Fed's policy meeting in February, crypto market participants are now worried what could come out of the growing tension between Russia and Ukraine. Fearing a full-blown conflict, investors and traders are now taking money out of the market and loading up on safe havens such as U.S treasuries and gold.

 

Bitcoin’s swift recovery from multi-month lows early this month brought much joy and relief to crypto investors and traders battered by the 15-week long downturn in the market. The digital currency had an extraordinarily strong start to February. It climbed back above the psychologically significant $40000 mark and went soaring up to test the $45000 resistance. 

 

Short-Lived Recovery

Bitcoin’s rapid surge to these levels instilled a fresh dose of enthusiasm in an otherwise insipid market but it had absolutely no effect on a good chunk of participants. They were not convinced that the worst was over and decided to stay on the sidelines to see whether this short rally would snowball into a bigger and longer one.

 

But some participants were overly confident that a bottom was in for the short-term and that Bitcoin had finally turned a corner. They were sure the market had already priced in all the negative news going around with regard to the Fed's policy meeting in March and an imminent breakout of a war. The widespread belief was that Bitcoin was set for a big move upwards and would recoup its losses after experiencing extreme price volatility between November 2021 and January 2022.

 

As it turns out, Bitcoin and the broader market is not out of the woods just yet. At the time of writing, BTC is endeavoring to push through the $38000 levels to retest the $40000 resistance but comfortably above the nearest support at $36000.

 

Bitcoin On-Chain Supply Data Provides Relief

Last week, the on-chain analytics provider Glassnode came out with a report stating that Bitcoin and the broader crypto market could be in for a rocky ride in the forthcoming weeks. One small bit of consolation is that on-chain supply dynamics is still looking as stable as ever, meaning investors and traders are more determined than ever to hodl (Hold On for Dear Life) and better prepared to ride out the storms facing them. In simple words, the supply data suggests that investors continue to look to rack up BTC every time the price dips and hold firm against the existing macro headwinds no matter what. How well they can hodl and survive through the challenges in the coming weeks will determine where the market goes?

 

Why? What has changed that investors are now able to hold with confidence? Availability of robust risk management options in the form of derivatives has now allowed retail participants to hedge out risks- a sign that the market has really matured over the last year. Such de-risking wasn’t possible a few years ago, when the only way to keep the risk down if the price nosedived would be to dump all open positions and exit the market.

 

Trade with Caution

As long as there is no adverse event in the coming months, we’re good. However, if the situation between Russia and Ukraine escalates into a war, we might see unprecedented levels of volatility in the market which might lead to a mass exodus of panic-stricken investors and traders and send the prices on a rapid decline to low levels that no one could have imagined back in November when Bitcoin was pushing $70000.

 

The Russia-Ukraine crisis has affected all financial markets globally, and Bitcoin and other altcoins are feeling the heat as well. The constant news flow- both positive and negative- have made it absolutely tricky to trade the market from either the long or the short side. But if you’re looking for immediate profit, it is very much possible to find a few legitimate trading opportunities. But you should be knowing where to look for them. Head on over to this site and figure out how the sophisticated automated trading application helps to make money automatically even in this drifting market without the traders having to move a finger. These special trading applications are designed to execute trades with a high win rate on their own. Just lay down the rules the system should stick to, load your trading account, and see your profits grow.

 

Trade cautiously and perhaps with a manageable position size until the dark clouds hanging over the Eastern Europe get blown over.