Bitcoin market oscillates between hope and fear

For many investors, the past week has been a rollercoaster ride. Stocks, bonds, precious metals, and crypto all experienced significant movements. Bitcoin plunged last Wednesday, only to begin an upward trajectory the following day. Is this volatility now behind us? Have digital currencies found their way back up? That, and more, you'll read in this Weekly!

This Weekly in brief:

• Market: After the sharp decline last Wednesday, the crypto market rebounded on Friday. Bitcoin, with prices around $64,000, is back in the price range where it has been for ten weeks.
• News: In the United States, regulators continue to tighten their grip. Robinhood is the latest company to receive a warning of an impending lawsuit. American bitcoin funds saw green numbers again for the first time in seven trading days.
• Behind the scenes: We recently launched Amdax Research. Here, the crypto experts working at Amdax or affiliated with Amdax publish in-depth analyses and forward-looking insights.

Market update

Last Wednesday, the price of bitcoin dropped to $56,500, the lowest point of this correction. On Thursday, the market turned around, driven by a combination of Jerome Powell's speech, the chairman of the US Federal Reserve, and weak job figures in the US.

It's all about how hard the Fed hits the brakes. So far, the central bank has mainly focused on inflation, which needed to come down first. On Wednesday evening, Powell mentioned that he is now also looking at the second part of his mandate, employment. If unemployment rises, that's an argument for lowering interest rates.

In the following days, on Thursday and Friday, the job figures were released. Unemployment was slightly higher than expected, and fewer jobs were added than market analysts had anticipated. Bad news is good news, in this case. Financial markets surged. Bitcoin's price quickly returned to around $64,000, back in the price range where the coin has been for ten weeks.

Overall, the tally now stands at a 23% drop from the peak of this bull market of $73,800 on March 14. That's the largest correction of this market cycle. Have we seen the bottom of this correction? Are we now on our way to new all-time highs?

There are indications that this correction may have run its course. Last week's dip brought us below the average purchase price of investors who bought in the past five months, the short-term holder realized price. This has often marked the bottom of a correction in the past.

However, looking from the perspective of cycle analysis, we might expect another week or two of weakness towards a daily cycle low in the second half of May. This could bring prices back below $60,000.

There is support for both scenarios: a swift end to this correction, and further continuation. An interesting indicator seems to be the 50-day moving average. It appears to play a significant role in many charts of crypto-related assets. Not only bitcoin, ether, solana, and a whole list of altcoins, but also crypto stocks like Coinbase and MicroStrategy and aggregates like the total market capitalization of all cryptos.

The chart below shows the price of solana, one of the better-performing coins in this correction. It has already broken out above the descending trendline, after a double bottom around $120. But even for solana, reconciling with the 50-day moving average and the horizontal level around $160 seems too much to ask. We're keeping a close eye on this dividing line. If various crypto assets suddenly break through it, it significantly increases the likelihood that we've seen the end of the correction.

News overview

Of course, the ball didn't disappear. Kuhn concealed it in his hand and only pretended to throw it. But many people watching this trick were certain that the ball left his hand. Two-thirds of the participants in the experiment claimed to have seen the ball thrown into the air on the third attempt, even though it never happened.

One ingredient is essential for this trick. Without this element, it doesn't work. It's the pull of our brain to predict the near future: expectations. In his book "Experiencing the Impossible," Kuhn explains that our expectations of the future are based on patterns from the past. Our brain builds narratives based on recent experiences.

The same process plays a significant role when investors try to make sense of financial markets. Recent price movements are crucial; narrative follows price. When the price drops, it's easy to become increasingly pessimistic. And when the price rises? The opposite happens. Thus, sentiment can swing between hope and fear even in a relatively short period like a week.

During price declines, reference is often made to the tightening situation in the United States. Regulators continue to tighten the reins. After Uniswap, the publicly traded Robinhood received a warning from the SEC about an impending lawsuit focusing on the classification of tokens. On television, SEC Chairman Gary Gensler acts as if this is the most logical thing in the world, even though his agency has been rebuffed by the courts multiple times.

During price increases, the focus remains on bitcoin ETFs. After seven consecutive red trading days, money flowed back into American bitcoin funds this week, totaling nearly $600 million. Notably, Grayscale's fund (GBTC) posted green numbers for the first time. Rumors circulate that pension and sovereign wealth funds are heading towards ETFs and that Chinese investors will soon gain access to the recently launched Hong Kong funds. "The demand for bitcoin is only growing."

Following this week's market analysis: hope and fear are likely to continue alternating!

Other news:

• Bitcoin spot ETFs in Australia this year? According to Bloomberg, there is a high chance that the main exchange in Oceania will approve multiple funds this year. The significant influx of dollars into US ETFs could be the main driver. Self-managed pension wealth in Australia could lead to substantial inflows.
  
  
• MicroStrategy is building a DID protocol on bitcoin. The bitcoin company unveiled the protocol at its annual conference. DID stands for decentralized identity and refers to a way to identify yourself without using a central authority and without disclosing sensitive data. Some in the Bitcoin community were not pleased that the protocol uses inscriptions.
  
  
• Former Binance CEO sentenced to four months behind bars. The prosecutor demanded a three-year prison sentence, but the judge did not agree. Changpeng Zhao (CZ) expressed regret for the mistakes he made as CEO during the hearing. With an estimated net worth of over $30 billion, CZ has become the richest prisoner in the US.