BTC reclaims $28K: Bull market signs start… but recession may deter it
Quick Bitcoin has shown considerable strength even as global stock markets remain impacted by recent banking failures in the US. The declaration of a US recession can, however, spoil the party in a big way. Investors need to await for the right confirmation of market trend before going all-in.
Today, we track key trends that show positive to neutral outlook for Bitcoin enthusiasts.
US Fed raises interest rates but is softening
The US Fed earlier gave indications that future interest rate hikes can go higher this year in order to fight inflation. Having increased interest rates by 25 bps in the current round, the Fed’s messaging is leaning towards some softening in the next three months i.e. stop interest rate hikes and eventually lower rates in second half of the year. This will happen provided US macro data doesn’t suggest an impending recession.
Bitcoin is becoming an hedge against traditional banking cracks
Even as the S&P 500 and other major stock indices shed 2–3% this week on US Fed interest rate hike, Bitcoin (BTC) has recovered well to reach its best level since June 2022. This month, BTC has gained 22% overall compared to a 0.5% loss in the S&P 500 index. As long as the market is hopeful and has good liquidity, BTC seems to be detaching itself away from S&P 500 sentiments. This is good in the long run.
Bitcoin dominance is now testing 48–50%
BTC dominance (as a share of crypto market cap) is now above 47% and heading for 50% — a level not seen since June 2022. Altcoins, including Ethereum, has bled against BTC in recent weeks. This consolidation usually marks the final phase of a bear market in crypto. Once BTC dominance hits 55–60%, the altcoin market would have bottomed and be geared up for next bull run.
Bitcoin Dominance Chart
Though, a recession may have a strong negative response
As much as investors choose BTC to redirect their investments, it is likely that a declared recession may drain cash out the ecosystem — marking declines in all risky assets including crypto.
S&P 500 in the US fell close to 37% during the last 2008 recession year. So far, this bear market it has only been a 20% decline (2022 data). Dow Jones Real Estate index fell 43% in 2008 compared to a 22% decline this bear market. Essentially, there is more room to fall for all risk assets. If a US recession is not declared this year, the market may consolidate near current prices before heading for a bigger rally.
The sentiment is mixed right now as markets are dependent on the softening of macro conditions. The recent Bitcoin price appreciation should only be treated as a mid-bear market rally and not the return of bull market yet till we have a confirmation of the trend.
Investors need to remain patient and stick to the following:
· Do your own research (DYOR) and keep yourself updated with industry developments
· Limit exposure to small cap coins and deploy the majority of capital to Bitcoin and Ethereum
· Do not hold all your eggs in one basket. Spread your risk across assets (dollar, stocks, gold, crypto etc) to lessen the impact of a strong downturn
· Be patient enough to HODL and follow a disciplined investment pattern such as cost averaging
· Store and trade your cryptos only in recognised crypto exchanges and wallets
