Key Takeaways
- Fear and greed index drops to new yearly lows as Bitcoin trades under US$90k
- Stablecoin market continues to see growth
- Impactful inflation metric releasing this week out of the US
The market has fallen to levels of fear not seen since mid-2024. This comes while Bitcoin has fallen under US$90,000 (approx. AU$139,000). Bitcoin is currently down -17% since the start of February.
Overnight we have seen the cinders from the global trade wars re-ignite, with the US targeting the EU. Donald Trump has threatened to slap 25% tariffs on imports from Europe, quoted to be making an official announcement very soon.
While volatility has certainly picked up in the last few days, we are still awaiting potentially impactful economic data announcements later this week. More on this below.
Stablecoin sector growth
Retail sentiment might be the worst I’ve seen. Buuut, on-chain data doesn’t necessarily reflect the doom and gloom weaving its way through social media.
We have continued to see liquidity in the stablecoin market deepen with the sector’s capitalisation rising US$8.3b in the last 30 days.
Data available from Circle shows an additional US$5.3B in USDC has been added to circulation in the last 30 days. For perspective, this represents 18% of the total amount they’ve added (net) into circulation in the last year.
Yet, this rise in stablecoins means investors are likely pulling cash out of altcoins to weather the volatility. But, it also shows money waiting on the sidelines, ready to enter if conditions turn favourable.
Headline inflation data to land
A lot of the negativity is stemming from macroeconomic uncertainty, particularly around inflation. But we have some big data dropping soon that could change the tune.
US Personal Consumption Expenditures (PCE) data will come out on Friday at 11:30 pm AEST. This metric is used by the Federal Reserve to guide monetary policy in the US.
Importantly, the Federal Reserve is closely monitoring both inflation and jobs data. Lower-than-expected inflation results on Friday may pave the way for easing in economic conditions in the near future. This could blow positive tailwinds for crypto markets and steadily shift sentiment away from extreme fear. If the macro picture starts to improve, all those stablecoins sitting on the sidelines could come back into play.
Bitcoin analysis
But with confidence plummeting in the short-term, even the market stalwart, Bitcoin couldn’t handle the heat. After the Bollinger Bands tightened in mid-February, volatility has returned to the market, resulting in a sharp drop in Bitcoin’s price. With these bands expanding, we wait to see how the market responds. Below are two potential scenarios.
Bullish scenario
Should price push higher back inside the lower Bollinger band, this could then result in Bitcoin reclaiming its January low (US$89.2k), and the yearly open (US$93.5k). A better-than-expected PCE reading on Friday might be the catalyst here.
Bearish scenario
Prices continuing to trend lower and remaining outside the lower band could see further downside.
💱 Swyftx Flows
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