The Bitcoin price ended the week below $40,000 as the worsening situation in Ukraine provided a headwind for risk assets. On Thursday, Russian President Vladimir Putin stated that peace talks with Ukraine had reached a stalemate during a news conference.

Over the weekend, Russia’s renewed attacks on Ukraine’s capital, Kyiv, adversely affected stock markets worldwide, including cryptocurrencies. 

Other factors influencing the top last week included:

  • The U.S. dollar index (DXY) surged to a new 2022 high, following the dovish European Central Bank press conference. 
  • A strong pullback in the Nasdaq and the S&P 500 after a promising mid-week rally fizzled out.
  • The People’s Bank of China failed to make any meaningful policy action, dispelling market rumors of potential QE from the Chinese central bank.

Last week, Elon Musk announced a $43 billion bid to become a major shareholder in Twitter. Given the billionaire’s affinity toward the crypto industry, the move was viewed as positive for the niche market. 

However, Twitter’s board members are reportedly taking active steps to block Elon’s takeover, taking away the positive catalyst. 

The fundamentals point to a continued sell-off in risk-on assets with no positive catalyst on the horizon. Nevertheless, the market sentiments and on-chain movements suggest that a positive reversal is likely to occur in the crypto market shortly. 

Strong Biases

The primary sentiment among crypto traders is one of resignation with little hope of a meaningful price rally amidst the current geopolitical backdrop. The Weighted Social Sentiment metric confirms this observation, which has recently been falling off a cliff, tagging levels not seen since March 2022.

The funding rate for perpetual swaps also turned negative last week, suggesting that most traders are betting on lower prices. 

Whenever such a strong market bias takes shape, I think it’s time to note, as the herd is rarely correct. Fading the mainstream narrative has proven to be a lucrative crypto strategy since I care to remember. However, I wouldn’t turn wholesale bullish just yet. 

The near-term risks of a somewhat prolonged pullback are still present, with tax season looming in the United States and the Fed preparing for this year’s second interest rate hike.

The economic calendar for this week focuses on China. This morning, China’s gross domestic product (GDP) numbers came out higher than expectations, strengthening the positive outlook. 

However, the projects for the second quarter looked bleak due to the resurgence of COVID-19 cases over the last few weeks. 

The Chinese central bank will decide on the benchmark interest rate on Friday. Last week, the People’s Bank of China acted unfavorably for risk assets by keeping the rates unchanged. It will be worth noting their decision this week on whether or not they decide to reduce the rates to accommodate the recent slowdown due to COVID-19.

Economic Calendar. Source- Forexlive.com

On-Chain Positivity 

The Token Age Consumed metric recorded a significant spike on Thursday, signaling an $8,000 to $10,000 directional move in Bitcoin’s price. 

The indicator is used to time market volatility. It depicts the relative movement of “old wallets,” which have held Bitcoin for a significant period, compared to the “new wallets.” Transfers from old wallets signal that long-term HODLers are executing large trades. 

One caveat of the TAC metric is that it only predicts volatility and not the direction of the move. It is coupled with other metrics such as exchange flows to gauge the direction.

Bitcoin’s token age consumed metric. Source: Santiment

Last week, it was encouraging to see more significant outflows from exchanges than inflows. In fact, since March, the netflow of crypto exchanges has been negative, suggesting a considerable buying interest. 

The 7-day moving average of outflows ranged between 700 to 7000 BTC taken off exchanges every week. The recent on-chain movement suggests a build of positive pressure.

7-day Moving Average of netflows to/from exchanges. Source: Glassnode

The Spent Output Profit Ratio (SOPR) is a strong hand indicator highlighting the threshold support level based on on-chain movements. 

When the SOPR metric moves below its pivot point, it suggests that short-term investors are moving their coins at a loss. Thus, indicating weak hands in the market. 

On the contrary, if the buyers can protect the pivot level, it establishes a positive trend in the market by building confidence among holders.

Bitcoin entry-adjusted Spent Output Profit Ratio. Source: Glassnode

Currently, average short-term buyers are holding BTC at breakeven prices. Many short-term investors will likely panic sell if the price breaks below the pivot. Thus, the price must hold current levels to avoid the selling pressure. 

Bitcoin’s $40,000 Inertia

Despite a few promising rallies last week, Bitcoin had a tough time as sellers pushed the price below $40,000. 

The U.S. consumer price inflation (CPI) print near the market’s expectation of 8.5% acted as a positive catalyst early in the week. However, towards the end of the week, negative global fundamentals and a downturn in stock markets dragged Bitcoin and the crypto market lower. 

Currently, Bitcoin appears to be forming a bullish triple-bottom pattern across several time frames. The pattern would confirm if Bitcoin holds above $37,000 support and stages an upward rally. 

It is also likely that BTC drops lower from current levels towards support at $37,000 before moving higher. 

The Stochastic indicator reached the oversold region on the daily time frame and is starting to generate its first meaningful buy signal since the end of February. 

The road ahead is paved for a momentum breakout if bulls surpass the $42,000 to $43,500 resistance cluster. Failure to do that this week and the chances of tagging $37,000 will increase.

BTC/USD Daily price chart. Source: Trading View

Litecoin Fun

Litecoin is probably my favorite crypto coin to trade. Even though it has weak fundamentals and market opportunities, the long-standing network provides easy-to-read price flows for profitable trading. 

For the lack of a better word, Litecoin has been a bit of an underdog since late 2021. However, LTC is starting to show signs of life, and I think it deserves attention from a trading perspective as long as the bulls defend the March low of $96.25.

My price chart says LTC reached oversold territory and that a key uptrend breakout will happen if LTC makes its way past the $130 area. I expect a quick run towards the $160 level if that happens.

Above $160, I don’t think the rally will stop until it reaches $190 this summer. We could see some excellent trading opportunities for Litecoin on pullbacks.

LTC/USD Daily price chart. Source: Trading View

FIL Your Bags

After the crypto bull market ended, the market crushed Filecoin with no apparent end to the downturn for the unloved coin. FIL has gone from an all-time high of over $100 to a current value of just under $20 within one year.

I happen to like the set-up on the charts for FIL/USD right now. I think a turning point could be around the corner, and more so if the broad market starts to pick up. 

The daily FIL/USD chart shows a broadening wedge pattern, with the price ranging between the trendlines for over two months. Currently, we are seeing negligible selling interest below the wedge; hence, it may be time for Filecoin to head higher and break above the pattern.

An explosive move will likely follow if Filecoin could get above the wedge around $30.

FIL/USD Daily price chart. Source: Trading View

The worsening Russia-Ukraine conflict, Shanghai lockdown, and Bitcoin’s solid price correlation with the tech stocks remain looming risks traders must bear in mind. Bitcoin probably needs some good news to get out of the gates this week for a technical break out above $40,600. 

Despite the selling pressure, it is encouraging to see Bitcoin holding around $39,000. It provides a compelling case that the downside could end soon, and BTC would likely push towards the peak levels of 2021.

I always remember the famous quote from John Maynard Keynes that “the market can stay irrational longer than you can stay solvent” when Bitcoin is not doing what I expect. Timing really is a critical element of trading.

Currently, I rather suspect that a retest of Bitcoin’s 200-day moving average at $48,100 will come before BTC touches $34,000 again. A sustained move below the $36,600 level needs to happen to prove me wrong.