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The price of bitcoin rose slightly during today’s trading session, but the cryptocurrency was unable to break the sideways trend. Today, the US Federal Reserve (Fed) announced a 25 basis point (bp) rate hike, but uncertainty in the financial world remains key.
As of this writing, Bitcoin (BTC) is trading at $28,600 with sideways movement across the board. Other major cryptocurrencies in the top 10 by market capitalization have experienced similar price moves, with the exception of XRP and Cardano (ADA), which have recorded small losses over the past 24 hours.
BTC price is moving sideways on the daily chart. Source: BTCUSDT Tradingview
Bitcoin Overwhelmed by Economic Uncertainty, But Bulls May Take Over
According to a report from trading service QCP Capital, Bitcoin and the cryptocurrency market are in a phase of confusion that has lasted for 8 weeks. As a result, the nascent industry experienced a decrease in implied volatility (IV), leading to the current sideways price movement.
Volatility, as measured by the VIX index, is falling to levels last seen during the bearish phase of 2022. This dynamic could trigger an aggressive move in the coming weeks, but the direction of this price move is unclear.
However, two key developments could help Bitcoin recover higher levels. Both scenarios will operate on the macroeconomic board, which continues to have a strong impact on BTC and other financial assets.
Firstly, QCP Capital claims that in the next two months the banking crisis in the US will continue to be relevant, as well as the national debt ceiling in the country. These narratives give the impression that the fiat system is weak, which could lead to further withdrawals of money from banks.
Is BTC Bull Run Inevitable?
Thus, the Fed should continue to bail out banking institutions and inject liquidity into financial markets. The debt ceiling presents a similar problem; the federal government may be forced to intervene because the US is unlikely to default on its debt.
As a result, more and more liquidity can flow into the financial markets, allowing Bitcoin to breathe and resume its bullish momentum. According to QCP Capital, this phenomenon is already happening.
Due to the banking crisis in the US, the Fed has been forced to step in, adding almost $500 billion to part of its balance sheet in the last two weeks, as seen in the chart below.
The balance sheet of the US Federal Reserve exploded due to the banking crisis in the country. Source: QCP Capital
The last time the Fed injected this much liquidity was during the COVID-19 crisis. At that time, the price of Bitcoin recorded huge profits and was in the price discovery stage for at least 12 months. The trading firm stated the following about the potential for BTC to make a similar profit:
The analogue compares BTC price behavior now (red line) with BTC during the 2020 cycle (yellow line), plotting the March 2020 and March 2022 lows. This shows that although we are probably in a period of consolidation here, the underlying trend ahead is still strongly up.
The BTC fractal hints at the possibility of seeing a new bull if the Fed continues to inject liquidity. Source: QCP Capital
Charts from QCP Capital and Tradingview