Navigating Bitcoin’s Recovery: Addressing Key Risks and Seizing Emerging Opportunities
The price of Bitcoin has seen a slight recovery from its monthly lows, yet it continues to face hurdles in breaking through the significant resistance level of $85,000.
On Saturday, Bitcoin (BTC) climbed to $84,525, marking a 10% increase from its lowest point this month. Despite this, it remains entrenched in a local bear market, having fallen over 22% from its peak this year.
At the moment of writing, Bitcoin was trading at just above $84,335.
On Friday, Bitcoin and other altcoins experienced a minor uptick, reflecting the positive trend of other asset classes such as stocks and gold. The Dow Jones industrial average surged by more than 650 points, while the S&P 500 and Nasdaq 100 saw increases of 117 and 450 points, respectively. Meanwhile, gold soared to an all-time high of $3,010.
Bitcoin price encounters potential challenges
The recovery of Bitcoin faces two notable risks and two possible opportunities. Firstly, there are indications that investors are still feeling a sense of trepidation. Although the Fear and Greed Index has moved out of the extreme fear zone of 18, it remains in the fear zone at 22.
Historically, Bitcoin and other cryptocurrencies perform well when the index is situated within the greedy zone. This apprehension is further evidenced by the $143 million in assets withdrawn from spot Bitcoin ETFs, contributing to a total of $870 million in outflows over the past week. Notably, there have been outflows for five consecutive weeks.
Secondly, on a technical level, Bitcoin has encountered a death cross, where the 50-day and 200-day Weighted Moving Averages have intersected. Typically, this crossover indicates potential further declines over time. In Bitcoin’s specific situation, there is still the potential to revisit $73,900, the peak observed in March 2024.
BTC price chart | Source: crypto.news
Potential opportunities for Bitcoin price
Regarding Bitcoin’s first opportunity, investors should pay close attention to the Federal Reserve’s announcements following its second meeting of the year on March 18-19. Concerns about a recession could prompt the central bank to adopt a more dovish stance and suggest additional interest rate cuts.
A shift in policy by the Federal Reserve would be favorable for Bitcoin and other altcoins.
Another opportunity arises from the possibility that investors might adopt a risk-on attitude and take advantage of the dip in both the stock and crypto markets, given that the most severe risks related to tariffs have already been factored into the market losses totaling trillions in value.
This trend has been seen previously, particularly during the COVID-19 pandemic. In March 2020, investors reacted with panic, selling stocks and cryptocurrencies, only to buy back in once the Fed signaled a notably dovish approach.