While the first week of March may not bring forth any specific crypto catalysts, a few are beginning to draw attention.
Firstly, many anticipate the pending spot Ethereum ETF applications will receive approval in May at the SEC’s final decision date, although institutions have been lobbying for an earlier green light.
Getting Ready for a Market Adjustment in March 2024
There may be a potential market correction in the current climate. Historical data indicates a pattern of price downturns preceding halving.
- The looming question revolves around the potential impact of spot Bitcoin ETFs on the crypto market this week.
- Despite steady inflows into these ETFs, there has been a notable presence of sell pressure from entities like Genesis and Celsius.
- Consequently, while one might logically expect BTC’s price to continue ascending, this assumption hinges on the absence of significant sell-offs.
Additionally, market dynamics could be influenced by the revision of Q4 GDP data on Wednesday and potential surprises in the PCE, the Fed’s favored inflation metric, on Thursday, which could trigger rallies.
- Moreover, the market will remain on edge, with numerous statements expected from Fed members throughout the week.
- Historical volatility suggests potential market turbulence as the Q1 options expiry approaches on Thursday, March 28th.
There are also macroeconomic concerns emerging, notably Israel’s announcement of escalated operations in Gaza by March 10th, which may lead to supply chain disruptions around the Red Sea and subsequent inflationary pressures in Europe and beyond.
- Similarly, reports of Russia’s advances in Ukraine have prompted the US and its allies to impose additional sanctions, potentially disrupting global supply chains and geopolitics.
- Notably, the EU’s sanctioning of Chinese and Indian companies for their dealings with Russia may strain relations with these countries.
Despite these challenges, crypto may have a silver lining, as it stands to benefit from such disruptions, given its borderless nature. However, concerns arise regarding the decentralization of certain cryptocurrencies, highlighted by the pressure on Circle to cease issuing USDC on Tron.
Our opinion:
We should prepare for a potential correction in the current market climate. Historical data indicates a pattern of price downturns preceding Bitcoin halving events. Analyzing BTC/USD price movements from 2009 to February 16, 2024, reveals several instances where Bitcoin’s value declined in the three months leading up to each halving event.
For example, the halving on May 11, 2020, followed a notable price drop, primarily driven by the ‘Black Thursday‘ market crash on March 11, 2020. While there remains the possibility of another pre-halving price decline, it’s important to note that the value could also rise post-halving due to the reduction in block rewards.
As speculation intertwines with historical trends, it’s essential to anticipate nuanced shifts in value. Additionally, it’s worth noting that meme coins are currently outperforming BTC, which could be a cause for concern. Therefore, it may be prudent to allocate some funds for investment in case of a price dip.
Leverage Washout on Horizon
Source: Coinglass
According to crypto data aggregator Coinglass, traders on platforms like Binance, Bybit, OKX, and Huobi have experienced $379.81 million in liquidations in recent hours, mostly stemming from those attempting to short BTC.
- The largest single liquidation order occurred on Binance, involving ETHUSDT, valued at $10.38 million.
- Meanwhile, data from crypto structuring and trading solutions firm STS Digital reveals that the ratio between the implied yield basis, representing the annualized spread between prices for one-month futures and prices in spot markets, and options-induced one-month implied volatility has more than doubled to around 0.34 this year.
- A significant implied yield basis relative to underlying volatility often indicates heightened levels of leverage and speculation.
Excessive bullish speculation can lead to leverage washout, where leverage positions are forcibly closed due to margin shortages. These so-called long liquidations can contribute to a sharp decline in prices.
The Sentiment Back To Greed
Following recent developments, the sentiment in the crypto market remains greedy, as indicated by the Crypto Fear & Greed Index. According to the index, the average crypto investor’s prevailing sentiment is “greed.”
- BTC’s fear and greed index has reached 72, marking a substantial increase of 20 points since the beginning of the year.
This index is a gauge for identifying pronounced bearishness at market bottoms and “irrational exuberance” at market peaks. It has demonstrated high sensitivity to BTC price movements within the current range.
- Even minor fluctuations in BTC/USD can trigger significant shifts in sentiment, potentially leading to a rapid transition towards “extreme greed.”
- Such shifts may signal that the market’s upside momentum could be short-lived.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
