The cryptocurrency market is making attempts to get into positive territory. The BTC/USD pair wasn't off to a good start this week, retreating to $36,350. After that, the buyers regained some lost ground, and the rate recovered to $39,000.
Market participants explain the renewed interest in BTC by technical factors and the asset's mere correction within a full-fledged bearish trend. Let us recall that since the beginning of the year, the world's most popular cryptocurrency has lost more than 20% in its value, plummeting from $47,300. As for the macroeconomic backdrop, it remains supportive of the sellers.
The cryptocurrency market keeps being affected by geopolitical risks associated with the escalating tensions in Eastern Europe. In addition, investors are naturally worried about the upcoming monetary policy tightening in the United States, as well as the possible introduction of new cryptocurrency regulation by U.S. legislators.
The Securities and Exchange Commission (SEC) is currently consulting with digital marketplaces to create regulations that will protect investors from financial loss and data theft on the one hand and won't interfere with the development of digital businesses on the other.
SEC Chair Gary Gensler said they are considering stricter cybersecurity rules for advisors, brokerage firms, and publicly traded companies. The U.S. authorities are increasingly concerned about the impact of the digital sector on the national economy, which may result in restrictive measures.
Traders are still analyzing the prospects of an early monetary policy tightening in the U.S. According to the Fed's meeting minutes, published last week, officials still believe that raising interest rates is the only way to tackle Inflation.
Meanwhile, market participants are preparing for the Fed's March meeting in 2 weeks. According to CME Fed watch, 32.5% of traders have already priced in a 50 basis points rate hike (up from 22% last Friday), and 67.3% of traders believe that the Fed will increase its rate by 25 basis points.
Regardless of the regulator's decision, the interest rate hike and the subsequent beginning of quantitative tightening will trigger volatility spikes in the global financial market. To address inflationary pressures, the Federal Reserve may raise the rate up to 6 times this year. Experts estimate that these monetary policy changes could result in the U.S. stock market decline by more than 20%.
Given that the cryptocurrency market has been strongly correlating with the stock market lately, the idea of using cryptocurrencies as "safe-haven assets," suggested by many experts, doesn't seem viable. Currently, investors prefer more traditional defensive assets (gold, bonds, franc), whose value continues to grow.
The present situation indicates that the current level of acceptance of digital instruments is not yet sufficient for Bitcoin to become a proper alternative investment. Considering the continuing stock market dip, we recommend shorting BTC/USD with the nearest target of $30,000.