Bitcoin closed Q1 2022 down 1.46% from Jan. 1, marking the least volatile quarterly price movement. But, that will likely change soon.

Risk-off sentiments prevailed in the first quarter of 2022. Despite the negative selling pressures, Bitcoin stubbornly held the $37,500 support. The tides are starting to shift, looking to break out from Fear, Uncertainty, and Doubt (FUD) to a period of Fear of Missing Out (FOMO). 

In the final week of the quarter, Bitcoin buyers attempted the first technical test of the trend defining the 200-day moving average (MA) at $48,300. However, it retreated to levels between $44,000 and $46,000 before the weekly closing. 

Bearish news that the EU Parliament passed new rules calling for the crackdown of unhosted wallets like Metamask caused a cascade of crypto selling.

Other bearish news catalysts for BTC last week included:

  • The world’s second-largest economy, China, imposed its most restrictive new COVID-19 lockdown since the pandemic began.
  • The stock market had an adverse reaction to the Russian bombings and the threat of additional economic sanctions.
  • America’s Treasury yield curve hovered near inversion, signaling the possibility of a recession. 
  • China’s manufacturing PMI fell to 48, underscoring that the Chinese manufacturing sector contracted in March.

As the Russian-Ukraine conflict continues to rage, things could get ugly enough to bring back the issue to the crypto market’s attention. 

Despite the broader price trend remaining bearish, technically, BTC had a strong monthly performance in March as it broke out from the nine-week long trading range between $37,500 and $42,000. 

Bullish April 

Chart patterns aside, I think a strong case exists for more upside in April due to the thick and fast bullish developments.

A lot of speculation exists that Apple Pay will announce Bitcoin integration on Apr. 7. This is just the type of bullish news that could propel BTC back above the $50,000 level and into a solid new bullish trend.

Let’s also not forget one of the important stories of the year: Terraform’s Labs ongoing Bitcoin purchase. According to estimates, the firm will complete its $3 billion purchase (out of $10 billion planned) by Apr. 22. 

Do Kwon recently told an interviewer that he is” betting on the long term growth of BTC price and isn’t worried about short term volatility.” This bodes well for the medium-term price trend and the purchase of an additional $7 billion BTC. 

Grayscale is also looking to sue the Securities Exchange Commission (SEC) over the spot ETF issue, setting up an exciting second quarter for 2022. 

The economic docket for this week focuses on the Federal Open Committee meeting, scheduled for May 3-4. The market expects no surprises from the conference and appears largely comfortable with a 50 basis point hike in benchmark interest rates planned for May.

Important events for the week. Source: Forexlive.com

On the face of things, April can potentially be a bullish month for BTC, starting with the Apple Pay announcement. 

Futures Positioning 

Since the beginning of March, the futures open interest (OI) volume has trended up. When OI volumes increase on derivatives exchanges, they usually follow substantial volatility periods driven by liquidation events. 

The steep declines in the OI volume indicate these flush-out events. The OI volumes have surged towards the September 2021 highs, suggesting that volatility will likely increase in the near term.

Bitcoin future open interest volume. Source: Coinglass

The Funding Rate for perpetual swaps helps identify the direction of majority trader inclination. 

Glassnode’s funding rate chart over the last month points to a neutral to slightly negative penchant among futures traders. We must also keep in mind that funding rates are usually positive in crypto markets. 

The Futures Premium data for 2022 year-end and March 2023 is $2,100 and $2,700. It implies that traders are only expecting a $2,700 increase in price over the next three quarters, which is relatively low.

Future premium on the spot Bitcoin prices. Source: Deribit

The premium for April 2022 contracts is negative, with a slight positive magnitude of $40. Overall, the futures market is not expecting an uptrend in 2022. 

However, if past price action is any clue, the contrarian strategy often works with the futures market. It’ll be interesting to see how the market’s positioning this week as it’ll help recognize the flush-out direction. Currently, it looks like it’ll happen to the upside. 

On-Chain Nostalgia

Bitcoin is going through a negative accumulation period based on the holdings of 1-2 year investors. This period usually marks negative price trends until this band of buyers tops out and exits. 

It suggests that the market begins a long-term uptrend only when short-term buyers exit. Currently, these investors are increasing their holdings. Thus, there is a considerable risk of a downturn.

Bitcoin holders between 1-2 years. Source: Glassnode

The current movement appears very similar to 2019, when Bitcoin’s price surged from $4,000 to $14,000 during the summer. 

At the same time, long term holders haven’t sold enough of their coins in the recent bear market compared to previous cycles. The sharp increase in 3y-5y holdings in the dip from $70,000 in Q4 2021 suggests that long-term holders are resilient.

Bitcoin holders between 3-5 years. Source: Glassnode

The shortest on-chain signal for identifying price trends is the Spent Output Profit Ratio (SOPR) indicator. 

Bitcoin’s pullback from $47,500 to lows of $44,000 last week caused the SOPR to reset to the base level of 1. It indicates that short-term holders are in profit above $44,000, forming a strong support area in that region.

Bitcoin Spent Output Profit ratio. Source: Glassnode

Bitcoin’s 200-Day MA Hurdle

BTC has not been able to close the daily candle above its 200-day moving average since Dec. 27, underscoring the importance of last week’s technical test and its overall psychological importance.

The location of the 200-day MA is currently around the $48,300 level, making this a critical level for buyers. Much above $48,300, the daily chart points to a run towards the $51,000 area.

Looking more closely at the daily time frame, BTC is trapped inside an ascending wedge pattern. Interestingly, these are typically considered bearish reversal patterns on most occasions.

Should this pattern play out, we could see a meaningful technical rejection at the first technical test towards the top of the mentioned triangle, close to the $52,000 resistance level. 

Dip-buying is probably the most attractive option, especially around the $42,000 area. There is also a probability that Bitcoin stages an early-week correction before testing the top of the pattern.

   BTC/USD Daily price chart. Source: Trading View

Ethereum’s Positive Breakout

Ethereum has moved back towards the $3,500 to $3,600 area, a critical price zone from late 2021 to early 2022. Essentially, it’s a key pivot zone for ETH.

Based on the recent triangle pattern breakout, Ethereum looks like it could be about to head higher again. 

ETH/USD chart on the daily time frame looks more bullish than BTC/USD. Additionally, ETH/BTC strength also underpins the strength of Ethereum.

There are a couple of reasons for the underlying strength, starting with the upcoming merge to Proof-of-Stake and the recent bullish article by the founder of BitMEX, Arthur Hayes. 

In terms of upside price targets, the $4,000 level is a natural upside target if we see ETH/USD breaking past the $3,600 level this week. 

Moves back towards the top of the triangle pattern have been bought aggressively. In April, any dips under the triangle or towards its mid-range will likely come as buying opportunities.

ETH/USD Daily price chart. Source: Trading View

ETH/BTC Signals Alt Season 

As mentioned above the ETH/BTC chart looks primed for upside on the daily time frame. It hints that we could see a period of Etheruem outperforming Bitcoin. 

While ETH/BTC has been in a negative trend this year, the recent breakout from the triangle presents a potential tradeable signal in the short-term. According to the trendlines, the 200-day MA at 0.72 seems like a favorable entry point with a target of $0.8200.

This trade also hints that other altcoins follow ETH and outperm BTC in terms of percentage gains. Nevertheless, the catalyst for the rise will likely be Bitcoin’s breakout above the 200-day MA.

ETH/BTC Daily price chart. Source: Trading View

The overall theme of this week’s Crypto Marker Roundup is bullish. I think a strong case can be made more upside in the cryptocurrency market, and specifically for Bitcoin in April due to the Apple Pay integration.

However, as mentioned at the beginning of the piece, considerable risks exist from a macro perspective. These are unprecedented conditions and could cause sudden pullbacks of extreme proportions. 

Thus, stop placement is a crucial issue from a risk- reward perspective. While there’s solid support around the $44,000 region, the downside risk to Bitcoin’s price extends up to $37,000, which is far too wide for a short-term trade. 

A more palatable trade in terms of risk would be a move down towards the $42,000 to $40,000 area. However, the likelihood of that happening decreases with consecutive daily closes above $44,000.