War puts Bitcoin price to the test - 5 things to watch in Bitcoin this week

Bitcoin (BTC) Begins Week Under Shadow of New Geopolitical Conflict - What Are the Key Hurdles for Investors?

Bitcoin’s macro environment has become less recognizable than it was a few days ago, and like many other assets, it is feeling the pinch.

Russia's invasion of Ukraine and subsequent war on Ukraine is wreaking havoc on global markets, with developments that could upend market sentiment within hours or minutes.

The timing has also hit bitcoin — the quality of its “safe haven” is being severely tested, with investors seeking safety and fiat currency holders looking for an exit.

As the most important influence of the week, Cointelegraph takes a look at Bitcoin's short-term outlook against complex and almost surreal macro events.

Here are five talking points for BTC investors this week:

Ukrainian war dominates

Needless to say, the Russia-Ukraine conflict was the main driver of market performance this week.

This situation, which emerged only 5 days ago, is still in a state of flux - sanctions keep coming, both sides and their allies continue to work, markets react to new threats and possibilities.

Chief among them is the Russian economy, which is bracing for Monday's turmoil. Stock trading has been postponed until at least 3 p.m. local time, and the outlook for its currency, the ruble, which is already trading at historic lows, is dim.

Talks are set to start on Monday, and any glimmer of hope could lead to a turnaround in the short-term outlook that could change the face of markets.

However, despite the uncertainty, everyone will be looking for the ultimate safe haven, and the use of Bitcoin — whether by ordinary Russians and Ukrainians, or their governments — has become a point of discussion.

As Cointelegraph reported, the Ukrainian military has raised millions of dollars in cryptocurrency aid, while far-reaching sanctions against Moscow could help leverage Bitcoin as an economic tool.

Ukrainian Vice President Mykhailo Fedorov called on exchanges to block funds from Russian and Belarusian users.

“Bitcoin is like a surgeon’s knife or a criminal’s knife,” podcast host Preston Pysh wrote summing up the situation over the weekend.

"Like all valuable technology, its value comes from the intent behind its use."

At the same time, the market may be driven by changes in local events and government knock-on effects.

Oil (but not Russian oil) has been one of the few beneficiaries of this war so far, while Bitcoin has managed to remain fairly stable - unlike gold, which rose rapidly initially and then lost all newly won markets .

However, the correlation between Bitcoin and altcoins and traditional stock markets remains, so no matter how the battle turns, the shorter time frames could cause real headaches for traders.

Spot price trend faces macro force majeure

With traditional markets volatile at the open on Monday, guessing where Bitcoin will go in the shortest time frame is a real problem.

Correlations aside, Bitcoin has remained in a fairly tight range so far, with $40,000 an obvious resistance zone that bulls can beat.

The problem, however, is that any sharper volatility could end up being the result of major macro changes, so it's an unreliable long-term signal.

Mike McGlone, chief commodity strategist at Bloomberg Intelligence, warned: "Bitcoin is down about 4% since Friday at 5:00 ET on Sunday (Feb. 27), suggesting that the risk asset will have a tough time. a week."

Meanwhile, the popular Twitter account Decodejar noted that the current price level represents a so-called point of control over the past 15 months, with $38,000 trading heavily relative to other price points in the current range.

“When it comes to Bitcoin, the playing field seems to be simple,” said Michaël van de Poppe.

“Consolidation after being bullish for the past week. If you really want to see more momentum, the correction shouldn’t be that deep, so $38.1-38.2K has to stay. Then, we could hit $44,000.”

At the time of writing, U.S. markets are still closed, and the situation is likely to change completely by Monday.

A comparison to March 2020 may be useful — when Bitcoin first followed global markets down, but then bounced back, becoming an asymmetric bet that took holders through an unprecedented nine-month period. bull market.

Another month, another red candle

Sunday's close didn't really go as planned by bitcoin market watchers.

The last-minute plunge wiped out the chances of a week and month close above $38,500, marking the first time since the 2018 bear market that the history books have seen four consecutive months of "red candles."

Last week's events were already an unexpected setback, and so far only seem to make things worse for bitcoin investors, who have yet to see the cryptocurrency move independently of traditional assets.

Another factor causing headaches for analysts is the monthly chart of the 21-month exponential moving average (EMA), which could lose support if it continues lower.

The break of the 21 EMA has been a common feature of Bitcoin macro bear trends, and February was fortunate to avoid a repeat.

"Tomorrow's monthly close is critical. A close below $37,000 would give us the same bearish signal as all other previous macro downtrends," analyst Kevin Svenson warned of a chart showing the level.

Bitcoin had previously failed to reclaim two key moving averages. Analyst Rekt Capital warned at the time that such an outcome could see prices revisit the lows of $28,000.

On a positive note, Bitcoin’s 200-week moving average topped $20,000 for the first time over the weekend, a benchmark that few thought would be challenged.

Difficulty is about to drop

Geopolitics aside, investors have every reason to have faith in the strength of the Bitcoin network.

Despite price pressure and uncertainty on nearly every time frame, miners have continued to mine, with hashrate and difficulty climbing.

This week may see a challenge to the status quo - the hash rate is stable, but considering the latest changes, the difficulty will drop for the first time in 12 weeks.

This phenomenon is not a “bad thing” — a 1.25% drop is modest by Bitcoin standards and likely reflects a change in the environment in which miners are participating, rather than the start of a new trend.

According to monitoring resource MiningPoolStats, the hash rate remains above 200 exahashes per second, a sea change from Bitcoin’s all-time high just a few months ago.

Fundamentals and prices have diverged over the past year.

The question now is whether the price will follow the hash rate as it has done in the past few years.

Emotions predict the worst

Bitcoin doesn’t seem to “like” the emergence of a new armed conflict in Europe.

Its potential role aside, the biggest cryptocurrency hasn't been buoyed by recent events.

According to the Crypto Fear and Greed Index, a sentiment indicator that is gaining traction in 2022, markets are rapidly becoming more nervous.

BTC/USD saw a small drop on Monday, but it was still enough to drag the index back into the "Extreme Fear" zone - down from 26/100 on Sunday to 20/100, its lowest point since February 22.

For reference, after hitting a local low of $32,800 in January, the Fear & Greed index rose to 11/100, a level that typically constitutes macro lows in recent years.

Still, commentators believe Monday's price drop could be a free-market early warning that doom and gloom will reign as market trading kicks off.

Meanwhile, the Crypto Fear and Greed Index was also in "Extreme Fear" mode last week ahead of a recovery.