The Bitcoin market was initially positive during the trading session on Friday, as there was more of a “risk on attitude” around the world. We have learned that Bitcoin is not a safe haven by any stretch of the imagination, as it has sold off drastically due to the Russian invasion of Ukraine, but it had been selling off drastically before than from the longer-term perspective anyway.
Bitcoin also got hammered by the idea of tightening monetary policy out of the Federal Reserve, which is a bit ironic when you think that the whole idea behind Bitcoin was to get out of the banking system. Tightening monetary policy in the traditional banking system should in theory not have any effect on this market at all. That is obviously not the way it works in real life now, and therefore you need to look at this through the prism of something like a commodity.
One of the biggest problems that Bitcoin has is that risk appetite has dried up for a lot of friends markets, and even though Bitcoin has become quite a bit more popular, it is still essentially the far end of the spectrum. Furthermore, you need to keep in mind that a lot of an institutional money has come into this market, and therefore it makes a certain amount of sense that the markets are going to act like a traditional market. In other words, Bitcoin has changed quite drastically from being a backwater rebel, to transform into something more akin to a commodity futures contract.
In the short term, I think that the $40,000 level will continue to cause a bit of a problem, but even if we break above there it is likely that the 50 day EMA will come into the picture offering resistance as well. Underneath, the $35,000 level should continue to be supportive, but if we break down below there then I believe we go looking towards the $40,000 level. That is an area that being sliced through could open up the next major leg lower, perhaps sending Bitcoin closer to the $20,000 level over the long term. Anything below there would then open up the possibility of a “crypto winter”, just as we had seen after the last time the market scout way out of control four years ago.
