In a development Bitcoin went through a price drop of 12.5%, between March 14 and March 17 reaching a value of $64,545. This decrease led to a surge in buying activity near the $65,000 mark. The cryptocurrency community is actively discussing the direction of Bitcoin after the recent resolution of high leverage in Bitcoin futures. Investors are curious whether Bitcoin can surpass its peak of $73,755.
The focus in the world is currently on the monetary policy meeting of the U.S. Federal Reserve on March 20. Investors are eagerly awaiting the Feds decision even though it is widely expected that interest rates will remain unchanged. This meetings outcomes go beyond tactics and offer insights into the Federal Reserves confidence in the current economic landscape.
A key concern for Bitcoin enthusiasts is predicting when the Federal Reserve will stop reducing its $7.5 trillion balance sheet. A relaxed monetary policy by the Fed that increases money supply generally benefits assets, like cryptocurrencies.
Market analysts closely monitor the U.S. Monetary base dynamics, which include currency and reserves held by banks. To tackle inflation traditionally interest rates are raised to deter borrowing and business expansion. Some experts speculate that a potential Bitcoin bull market, in 2024 may be linked to a shift in the Federal Reserves policy from restrictive to expansive possibly triggered by inflation rates falling below 3% or signs of a downturn.
The recent behavior of the Bitcoin market is also influenced by the leverage seen among investors notably evidenced by the increase in open interest for Bitcoin futures in March. From February 25 to March 14 open interest surged from $22.2 billion to $35.5 billion resulting in distortions that’re not sustainable in the run.
Moreover on March 11 there was a funding rate of 0.09% for perpetual contracts equivalent to a weekly rate of 1.7%. This spike suggested a growing demand for leverage among holders of positions. However this trend reversed as the market experienced $370 million, in liquidations between March 13 and March 15 leading to 1% of positions being closed.
In a turn of events the funding rate, for Bitcoin adjusted to a 0.25% per week by March 15 indicating a balanced market sentiment. This suggests that there was no increase in demand for positions showing that investors were hesitant to bet against a drop below the $65,000 threshold.
A key aspect of gauging market sentiment involves examining the demand for stablecoins the USD Coin (USDC) in China. The premium on USDC remained above 3% over the week indicating that the stablecoin was trading at a value than its pegged rate despite recent price fluctuations. This ongoing premium highlights an interest in cryptocurrencies within China signaling market sentiment towards Bitcoin and dispelling immediate bearish trends or investor caution.
As the cryptocurrency community eagerly anticipates the Federal Reserves meeting outcomes speculations and expectations continue to circulate within the market. Recent price adjustments and efforts to reduce leverage in Bitcoin futures have set up a phase, for the cryptocurrency market. Investor sentiment and monetary policy decisions are poised to influence the direction of Bitcoin and other digital assets.
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