Bitcoin Price Dip: Macro Liquidity Concerns
Bitcoin (BTC) experienced a price correction, dropping 3.5% to an intraday low of $84,120 on March 28, following a positive start to the week. This rejection occurred near a descending trendline and the upper range of an ascending channel pattern, raising concerns among analysts.
The price remains below the 200-day exponential moving average (EMA), suggesting further potential downside if it closes below this key indicator.
Macro Liquidity and Bitcoin's Price
Macroeconomic analyst Capital Flows suggests a potential Bitcoin correction to the $72,000-$75,000 range if current liquidity conditions persist. Macro liquidity, the easily accessible capital in the financial system affecting risk assets like equities and crypto, is influenced by interest rates, Federal Reserve policies, and overall market sentiment.
Capital Flows highlights Bitcoin's increasing correlation with traditional risk assets, yet its position at the periphery of the risk curve. A shift in investor sentiment away from safer assets (like bonds) towards riskier ones (including Bitcoin) is needed for substantial capital inflow.
"Broadly speaking, the macro liquidity backdrop is currently neutral. Rates have decreased slightly, but the carry trade still poses risks for assets." - Capital Flows
Conversely, some analysts believe the increasing Global M2 money supply could fuel a Bitcoin rally. Historical correlations between the Global Liquidity chart (tracking M2 growth from major central banks) and Bitcoin's price movements support this view.
Crypto commentator Colin Talks Crypto predicts a Bitcoin rally around May 1, potentially lasting two months, based on the M2 supply correlation.
However, a key distinction exists between macro liquidity and M2 growth. While M2 reflects total money supply, macro liquidity focuses on capital's ease of flow into risk assets. Even with rising M2, macro liquidity might remain stagnant if capital is directed towards low-risk assets. Capital Flows notes:
"The quantity of money in the system isn't expanding like it used to."
CME Gap Filled: Short-Term Implications
Bitcoin's recent rally created a CME gap between $84,435 and $85,000. This gap, often filled, was closed on March 28, potentially leading to a short-term price bounce. This closure also aligns with a retest of the ascending channel pattern's lower range.
Despite this, some analysts foresee a longer-term correction. Trader HTL-NL indicates potential support at $76,700 before a drop below $74,000. Analyst Crypto Chase describes the situation as critical, suggesting a potential short position if the price fails to hold above a key support level.
Disclaimer: This article does not provide investment advice. Conduct thorough research before making investment decisions.
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