The cryptocurrency market cap experienced a decline of 6.54% last week, falling from $1.069 trillion to $0.997 trillion. This drop was caused by a crackdown on crypto companies and structural halts of firms like Silvergate Capital, leading to caution among digital asset participants. Prices have dropped due to multiple short to medium-term issues and increasing macroeconomic and regulatory pressure. This trend is expected to continue in the near future. The recent discussion between Fed Chairman Jerome Powell and congress members highlighted the hawkish stance of the Fed and the fearful nature of congress. As a result, the probability of a 50 basis points hike increased significantly, especially with expectations of hawkish CPI and PPI data.
The fact that Bitcoin is having trouble rising back above $23,000 suggests that the bears are attempting to turn the level into resistance. The BTC/USDT pair may fall to the crucial support at $21,350 if the price declines from the current level. Bulls and bears may engage in a bloody battle on this level. If the bears prevail, the pair may continue to decline until it reaches the psychologically significant level of $20,000.
On the other hand, if the price moves back up from $22,800, the bulls will try again to pass the overhead resistance level at $23,000. If they are successful, the pair might begin their upward movement toward $24,150.
On March 7th and 8th, Federal Reserve Chairman Jerome Powell testified in front of Congress. Although there was anticipation for some contentious dialogue, the only significant exchange was with Senator Warren. The effectiveness of interest rate hikes was once again questioned, with the ultimate verdict being the need for a balance between a high-interest rate environment and its impact on broader market parameters, such as jobs and businesses.
The likelihood of a 50-bps hike at the upcoming meeting depends on whether payroll growth doesn’t slow down and whether data from the CPI (Consumer Price Index) indicate that the progress we’ve made against inflation is stagnating. Following Powell’s testimony, there is an increased likelihood of a 50-basis-point Fed rate increase.
Despite regulatory scrutiny and macroeconomic challenges, there have been some positive developments in cases involving the Securities and Exchange Commission (SEC). The SEC had blocked the sale of Voyager to Binance, citing a long-standing securities violation that is being scrutinized for its application to digital assets. In another long-standing case involving Grayscale, the SEC’s arguments failed to gain confidence in the court, as the SEC had already approved a futures ETF for BTC, but the spot ETF for the same is being heavily restricted without sufficient justification. While final verdicts are yet to be determined, the courts are holding the SEC accountable, and their decisions will be crucial for the future of the digital asset industry. The slightly favourable environment for GBTC has reduced the discount it was trading to the NAV. The recovery has been sharp, considering the other issues the company is facing.
March 14th and 15th are critical dates for this month, as they will set the tone for the markets for the short to medium term in the constantly changing macroeconomic environment. Increased spending and other inflationary avenues are not slowing down as much as the markets had previously anticipated, contributing significantly to inflationary pressures. CPI[MoM] and Core CPI[MoM] have been on point for the last releases, and the forecast for the next print is expected to be 0.4 for each. However, there is a high probability that the prints will come in higher than expected, leading to a slight fall in prices. PPI [YoY] increased higher than the forecasted 5.4%, which is also the current forecast level. PPI was one of the fastest cooling down markers, but it suddenly changed direction, which is a little troubling for the markets.
Bitcoin returns were -5.55% for this week. The Alpha Blue Chip Focused Strategy returns were -9.88% during the same period (02 Mar – 09 Mar). The Top Cap Digital Assets Strategy and Arbitrage Opportunities and Balanced Strategy returns were 1.01% and 0.49%, respectively.