As the dreary first quarter draws to a close, cryptocurrency appears to have a wind in its sails. It has crossed the $2 trillion mark and proven surprisingly resilient amid global chaos.
At Monday’s high of $47,765, the market leader Bitcoin broke through the narrow range of $34,000 to $44,000 that had been trading for most of 2022. By rising from a low of just over $40,000 on March 21, it Gained 18%.
Its relative stability contrasts, at least against past performance, with stock markets, traditional currencies and even safe-haven gold, which have been shaken by Russia’s invasion of Ukraine as well as Fed tightening.
Bitcoin’s cruelty has faded lately.
Its 30-day volatility is around 4%, about two-thirds of the level it was in June 2021, according to futures trading platform Coinglass. The highest percentage this year was 4.56% on March 16th.
This measures its deviation from its own record levels, and bitcoin continues to experience extreme volatility, like a 17% jump on March 1, but it’s more complex than it was in 2021 when it could move up to 40% a day.
By comparison, the high-tech Nasdaq plunged 5-6% on several days in 2022, and was down 20% for the year as of March 14, before stepping in to trim half that loss.
“The biggest conflict we have seen in Europe since World War II has shaken global markets,” said Piers Crosby, general manager of charting platform TradingView in New York.
“What we’ve seen across other major assets is huge ramifications – from US stock markets as well as global markets,” he added. “Bitcoin has stayed somewhat in a very narrow range…but actually, in terms of relative strength, it is very bullish.”
2 trillion dollar cipher
The total value of the cryptocurrency market soared above $2 trillion on Friday, according to analytics platform CoinMarketCap. To put that in context, the market briefly hit $3 trillion on November 10, when Bitcoin reached $69,000.
The winding rise again above $2 trillion was slow and was also helped by the proliferation of coins and tokens – CoinMarketCap’s count rose by nearly 5,000 since November to stand at 18,511 cryptocurrencies.
Bitcoin’s market cap has reached $902 billion, but it still has ways to get back the $1 trillion it earned in November. While it remains the dominant cryptocurrency, its market share has also been gradually declining from as much as 70% of the total capital in early 2021 to 42% now.
What awaits us in the future?
Many cryptocurrency investors believe they can tell the direction of bitcoin before the sprawling volatile cryptocurrency leaves them in the financial dust.
“Although bitcoin remains strong in the short term, higher oil prices are raising the possibility of a recession over the next year or so,” said Marcus Sotiero, an analyst at UK-based digital asset broker GlobalBlock.
“Oil is up about 25% in the past six days alone, and bitcoin bulls will want to see this tail for continued strength.”
However, some other technical factors point to an upward trend for Bitcoin.
Funding rates, which measure the cost of holding bitcoin via futures contracts, are now marginally positive after being negative for much of this year, suggesting investors are willing to pay for the long haul. It stands at 0.003% on analytics platform CryptoQuant, although still below the peak of 0.06% in October.
Coinglass’s long to short ratio also rose from 0.95 on March 20 to 1.1, the highest in at least four weeks.
Blockchain data provider Chainalysis said that an increasing proportion of bitcoin — nearly 60% of total supply — is held for more than 52 weeks, up from 54.72% in the last 25 weeks.
However, Ashwath Balakrishnan, vice president of research at Delphi Digital in Bengaluru, cautioned that it would be difficult to establish a lasting direction for the market.
“Everyone is a little careful,” he said. “If (Bitcoin) refuses to break out of $46,000 and pulls back, that probably means we are stuck in band-limited terms for at least another month or so.”
(Reporting by Lisa Matakal and Medha Singh in Bengaluru; Editing by Vidya Ranganathan and Praveen Char)
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