Bitcoin’s start in 2022 wasn’t the most successful rally in the cryptocurrency’s history that showed mind-blowing results in 2021 by gaining more than 100% at the peak back in November. The rapid change in the sentiment put some traders in unpleasant conditions leading to additional losses.
Here are some circumstances in which the current market’s state could change from bearish to bullish.
Positive long-term context
While Bitcoin is bad-looking on mid-term charts as 1 day and 8 hours, the weekly chart of the asset is still not critical in hindsight. As the chart suggests, the coin still remains close to the strong support zone that correlates with the point that acted as a foundation for the previous rally back in September.
While we are yet to see the result of the current consolidation on the abovementioned support zone, the majority of cryptocurrency industry experts bet on Bitcoin’s short or mid-term reversal after facing a 70-day correction.
Key interest rate and market’s reaction
One of the most effective fuels for the most recent correction on the cryptocurrency market was the FED’s rhetorics towards the change in the monetary policy of the United States. By strengthening the monetary policy, the FED will most likely end the quantitative easing strategy and will stop pumping up the stock market.
Such policies are usually considered negative for risky assets like cryptocurrencies or even some stocks. After the release of the latest FED meeting protocol, the cryptocurrency market has plunged by an additional 15%. The same sentiment has been translating into emerging markets of countries like Russia or Brazil.
But due to the nature of financial markets, the key rate increase will no longer be considered as an extremely bearish event for the industry; hence won’t affect traders and investors’ portfolios as it did at the beginning of the year.
Mainstream acceptance
With the rapid development of the NFT industry, we can see more people joining the crypto industry. Various Hollywood celebrities like Paris Hilton, Snoop Dog, and even Mike Tyson have been recently interacting with the crypto community, attracting more and more potential investors to it.
While Hollywood stars attract more retail investors, the approval of the first futures-based ETF was a giant go-to signal for the whole industry as it indicated that U.S. institutions have finally accepted Bitcoin as a standalone financial asset.
While futures-based ETF shouldn’t be considered as an optimal tool for investing in Bitcoin, it still brought $1.1 billion of funds to the market in a matter of hours. Financial and ETF experts are not anticipating the approval of the physically-backed exchange-traded fund in the nearest future, but more futures-based ETPs are yet to come and hit the market in 2022.
Low volatility
The low volatility of almost any cryptocurrency is an exciting sign for those investors that are willing to use digital assets as an inflation hedge or store of value. Historically, whenever Bitcoin entered low-volatility periods, rapid and strong price action took place on the market shortly after.
In addition to the incoming volatility spike, the market could expect strong inflows of “fresh assets” as the number of new entities tends to increase drastically after the market goes through the low-volatility phase.
At the time of this article, Bitcoin is trading at $42,700 right after failing to recover and reach $45,000.
