Written by: Rania Gule, Senior Market Analyst at XS.com – MENA
Bitcoin has recently experienced significant volatility, starting at $83,000 and recording an 8% gain from its weekly low of $76,000. Despite these gains, Bitcoin remains trapped in a zone between risks and opportunities, with tight price movements and a lack of clear direction in the market. While there have been some indicators supporting short-term gains for Bitcoin, economic and geopolitical pressures could lead to further declines.
Last week, financial markets closely monitored developments in the trade war between the U.S. and Canada, which overshadowed investor reactions to economic data showing declining inflation. Under these circumstances, Bitcoin trading volumes fell for the third consecutive week, reflecting, in my opinion, a decrease in public interest in the cryptocurrency. The trade war, exacerbated by harsh statements from President Donald Trump, has been a factor that overshadowed any optimism from better-than-expected economic data. This trade war poses a threat to the future of financial markets in general, including cryptocurrency markets, where investors remain cautious about potential economic fluctuations.
On the other hand, Bitcoin started the week within a narrow range between $76,000 and $84,000, a range it struggled to break out of for several days, reflecting market uncertainty. From my perspective, this relative stability indicates that the catalysts for significant price movements are currently absent, with decreased activity in the cryptocurrency market. In recent days, Bitcoin prices briefly fell below the $80,000 support level, reflecting the market’s fragility in the face of global political and economic volatility.
Therefore, I expect Bitcoin to face weaker support if prices continue to decline in the coming week. If prices fall below $80,000 again, it could lead to a retest of the key support level, prompting traders to adjust their strategies more cautiously. This shift in market direction could increase the likelihood of new sell-offs, further pressuring the price and raising the chances of it dropping to lower levels.
Another factor that had a significant impact this week was the decisions made by Bitcoin exchange-traded funds (ETFs). Despite the ETFs seeing positive inflows of $13 million on Wednesday, the outflows from the market were larger, with investors pulling out an additional $830 million during the week, bringing the total outflows to $1.7 billion in March. This indicates that the market is still suffering from uncertainty, and the economic and geopolitical landscape could affect investor confidence in cryptocurrencies.
Regarding future expectations, some indicators may support Bitcoin in the coming weeks, despite the significant risks. Forecasts suggest that the Federal Reserve is highly likely to halt rate hikes in March, which could improve risk appetite among investors. If this happens, it could lead to more funds flowing into Bitcoin and cryptocurrencies in general, supporting a potential price rebound. Additionally, the chances of a resolution between Russia and Ukraine are approaching 75%, which could ease the geopolitical pressures that have been a negative factor in the markets.
Looking at geopolitical incentives, the potential decisions regarding Bitcoin from the U.S. government cannot be overlooked. Florida gubernatorial candidate Byron Donalds is preparing to introduce a bill to protect Trump’s policy on Bitcoin reserves, reflecting a political trend aimed at supporting Bitcoin’s stability as an investment asset. This development could have a positive impact on the market if approved, as it would enhance confidence in Bitcoin as a long-term investment asset.
However, risks remain, in my opinion. Especially if the U.S.-Canada trade war escalates further, and if stock markets decline as a result of global monetary policy fluctuations, Bitcoin may face additional downward pressure. Therefore, investors must monitor developments related to Federal Reserve monetary policies and any political actions that could affect global financial stability.
In the end, the future of Bitcoin remains surrounded by significant geopolitical and financial risks, but some opportunities could arise from a halt in rate hikes and easing geopolitical tensions. As the situation in the trade war and monetary policy trends evolve, the coming week could be crucial for Bitcoin, as market directions become clearer. Although Bitcoin may face the risk of dropping to $75,000, the chances of a rebound to $90,000 may remain if economic and geopolitical conditions improve.
