Bitcoin’s price rose slightly during today’s trading session, but the cryptocurrency failed to break the sideways trend. Today, the US Federal Reserve (Fed) announced a rate hike of 25 basis points (bps), but uncertainty in the financial world continues to dominate.
At the time of writing, Bitcoin (BTC) is trading at USD 28,600 with sideways movement across the board. Other major cryptocurrencies in the top 10 by market capitalization have experienced similar price action, except for XRP and Cardano (ADA), which have experienced small losses over the past 24 hours.
Bitcoin crippled by economic uncertainty, but bulls could prevail
According to a report from trading desk QCP Capital, Bitcoin and the crypto market are in an 8-week phase of confusion. As a result, the emerging industry experienced a drop in implied volatility (IV), leading to the current sideways price action.
Volatility, as measured by the VIX Index, is crashing to levels last seen during the 2022 bearish phase. These dynamics could drive aggressive movement in the coming weeks, but the direction of such price action is unclear.
However, two key events could support Bitcoin in reclaiming higher levels. Both scenarios work on the macroeconomic council, which continues to exert a strong influence on BTC and other financial assets.
First, QCP Capital argues that the US banking crisis will still be relevant in the next two months, along with the debt ceiling in the country. These stories create the perception that the fiat system is weak, which could lead to further bank runs.
BTC Bull Run imminent?
So the Fed must continue bailing out banking institutions and injecting liquidity into the financial markets. The debt ceiling poses a similar problem; the the federal government could be forced to intervene because the US is unlikely to default on its debts.
As a result, more and more liquidity could be pouring into the financial markets, allowing Bitcoin to breathe and resume its bullish momentum. According to QCP Capital, this phenomenon is already happening.
The US banking crisis has forced the Fed to intervene, increasing its balance sheet side by nearly $500 billion over the past two weeks, as shown in the chart below.
The last time the Fed injected this much liquidity was during the COVID-19 crisis. At that time, the price of Bitcoin made a huge gain and entered the price discovery for at least 12 months. The trading company stated the following about BTC’s potential to see similar gains:
The analog compares the price action of BTC now (red line) to BTC during the 2020 cycle (yellow line) by aligning the March 2020 and March 2022 lows. It shows that while we are probably heading into a period of consolidation here, the underlying trend ahead is still strong upside.
Charts from QCP Capital and Tradingview
