Bitcoin Fundamental Briefing, March 2022

Bitcoin Fundamental Briefing, March 2022

In the late of 2021, when we’ve started preparation to the new financial year, our fundamental view keeps small space for BTC growth in the environment of tightening Fed policy. And, until events of 24th of February, market accurately was confirming this position, as fundamentally BTC just can’t going higher, loosing competition to high dividend stocks and bond market. When inflation in the US has accelerated further, this negative effect to BTC becomes even more evident.

But, with starting special military operation in the Ukraine, situation starts to change. Cryptocurrencies in general and Bitcoin in particular start rising, which is impossible to explain using only economical factors. Some traders and analysts once again start repeating mantras on “safe haven” “gold like” features of the Bitcoin, while we have shown many times that Bitcoin doesn’t have it. 

By the process of elimination we’ve come to conclusion that drivers are exceptionally fiscal as investors try to safe their capitals and move them out of EU, investing in the US assets. And Bitcoin gets Its own piece of cake.

Market overview

Bitcoin broke out of a narrow trading range and wiped away this year’s losses amid a broad rally for cryptocurrencies, sparking speculation that the biggest digital asset could advance past the $50,000 mark soon. 

The token rose as high as $47,583 on Monday, well above the $35,000-to-$45,000 band where it’s been stuck since early January. With the fresh gains, Bitcoin is now up about 1.9% for the year, compared with a 4.7% decline for the S&P 500. Ether similarly bounced as much as 3.7% to $3,358 on Monday, while altcoins such as Solana’s SOL, Avalanche’s AAVE and Dogecoin rose between 5.5% and 9.4%.

Bitcoin may encounter its next resistance level at $52,000 and should it break through that, it could advance to $65,000 — not far off the all-time high it reached in November, according to Fadi Aboualfa, head of research at Copper. Rick Bensignor, the president of Bensignor Investment Strategies, said in a note Sunday that Bitcoin is “on the verge of a 20% run higher.”

The coin has been stuck in a tight path as the Federal Reserve and other central banks remove some of the stimulus measures they put in place in response to the pandemic downturn. That means there’s less cash to go toward riskier assets, including crypto. In addition, digital currencies came under scrutiny with speculation swirling that they could be used to skirt Russian sanctions, though many analysts rebuff that claim. 

Even so, Bitcoin and other tokens like Ether started a steady advance this month alongside broader increases in U.S. stocks. But it took until the past day for Bitcoin to convincingly take out $45,000, a level it had only briefly touched since early January. 

“As we test the top of the 2022 trading range for the fifth time, this is another one of these Bitcoin moments when the narrative could swiftly change and investors pile in, propelling the Bitcoin price higher,” said Antoni Trenchev, co-founder and managing partner at Nexo. “It might just be time to awaken from the Bitcoin-sideways slumber that’s been 2022.” 

The renewed optimism for cryptocurrencies followed comments by U.S. Treasury Secretary Janet Yellen, who said in a March 25 interview with CNBC that despite her own skepticism about the asset class,

“there are benefits from crypto and we recognize that innovation in the payment system can be a healthy thing”.

Speculation on social media also suggested trading was being supported by whale activity from the Luna Foundation Guard, an open-source organization focused on the Terra blockchain, which said it plans to back the network’s token with more than $10 billion in Bitcoin reserves.

Bitcoin was well above its 50-day moving average in recent days, which currently sits around $41,085. That puts it around the 80th to 90th percentile and in the “overbought” range, according to Bespoke Investment Group. But, though that signals potential for a downturn in price for many assets, with Bitcoin it’s historically been the opposite, the firm said.

“When it has been similarly overbought in its past (over the last five years), it has averaged significant gains going out one to 12 months,” according to the Bespoke report.

When Bitcoin has been in the ninth decile of its spread versus its 50-day average, it’s historically risen 16% in the next month, is up 100% six months later, and has gained 274% after a year, according to data compiled by Bespoke.

“This isn’t normally what you see for the typical stock or ETF, but because Bitcoin has mostly traded higher over the years and really has a lot of momentum trading behind it, overbought levels have yet to become a headwind for this particular space,” Bespoke wrote.

Bitcon’s gains since mid-March — even as war in Ukraine dragged on — on also bolstered it versus gold, its traditional safe-haven rival, which traded sideways during the period. 


Cryptocurrency investment products and funds showed net outflows for a second straight week, a report from digital asset manager CoinShares showed on Monday, on persistent concerns about regulation and the possible fallout from the Russia-US conflict.

The sector posted net outflows of $47 million in the week ended March 18, after experiencing outflows of $110 million the previous week. Previous to the last two weeks, digital asset investment products saw seven straight weeks of inflows.

The outflows came amid ongoing efforts to regulate crypto. President Joe Biden signed an executive order a few weeks ago requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other crypto issues.

Bitcoin saw the largest outflow of $33 million in the latest week, the report showed, following $70 million outflows previously. Year-to-date flows remained positive, however, at $63 million.

On Monday, bitcoin was down 0.5% at $41,047 . Since its intra-day low on Feb. 24 when Russia invaded Ukraine, bitcoin has gained about 18%.

“Even though bitcoin has retraced a bit after tagging $42,000 over the weekend, it still managed to close the week well above $40,000,” said Mikkel Morch, executive director at digital asset hedge fund ARK36.

“Such a retrace seems healthy after a notable move up over the past week and shouldn’t be viewed as a negative reaction to any particular piece of geopolitical or macro news. As long as bitcoin stays above $40,000, there is a good chance of continuation.”

Ethereum-based products had outflows of $17 million last week, lower than the previous week, which saw outflows of $50 million. Ethereum continues to suffer from negative investor sentiment, analysts said, with year-to-date outflows of $151 million, or 1.2% of total assets under management. In contrast, other altcoins saw inflows last week, such as Ripple, Polkadot, and Solana. Blockchain-linked equity investment products also posted net inflows of $17 million last week, up from $4 million the previous week.

Assets under management at Grayscale and CoinShares, the world’s two largest digital asset managers, fell from their highs to $37.25 billion and roughly $3.7 billion, respectively.

Number of whales, with more than 1000 BTC in their wallets have increased significantly, starting in early February:

Wow! About 150 new bitcoin addresses with > 1,000 BTC on them. This either means some rebalancing of exchanges or custodial services (non-event) or a group of people with deep pockets suddenly have strong interests to get into bitcoin (big event!) Which one is it gonna be? — Dr. Julian Hosp (@julianhosp) March 1, 2022

Some investors, as we do, suggest that it might be Russian oligarchs attempt to move money out of the sanction.

Trading volumes between the Russian rouble and the Tether cryptocurrency spiked sharply by the end of February as the local currency tumbled to a record low on Western sanctions, data shared with Reuters showed.

Rouble-denominated trades with the Tether – a so-called stablecoin – hit $29.4 million, their highest this year and around three times more than a week earlier, according to Arcane Research, an Oslo-based digital asset researcher.

“People with the rouble are trying to get out of it due to the drastic devaluation after all the sanctions,” said Arcane’s Bendik Norheim Schei. Under the current market conditions, I’m not surprised to see investors, at least those in Russia, seeking stablecoins and not taking on the market risk of BTC. This is about saving their funds, not investing.”

Bitcoin trading denominated in the Russian rouble went into overdrive when the military operation began on Thursday, with daily volumes rising 259% from a day earlier to 1.3 billion rouble ($13.1 million), according to data from CryptoCompare.

Bea O’Carroll, managing director at Radkl, a digital asset investment firm, said the war and Western sanctions had seen a trend emerge of bitcoin being used to transfer value.

“Basically, having a currency that is not controlled by the government, that is not affected by the emergency acts … is really interesting,” she added. “Maybe this is how Russia gets its value moved around. Equally, on the other side, there was ‘this is how people are going to get value to the Ukrainians’.”

The war has contributed to the narrative that bitcoin “is not just a speculative asset, it is also a seizure-resistant, policy-independent, longer-term store of value,” said Noelle Acheson, head of Market Insights at New York-based Genesis.
In the five days since Feb. 24, bitcoin has risen 13%, while the S&P 500 U.S. stock index that it often mimics is up around 2% and traditional safety play gold is now largely flat after gaining as much as 3.5% on the day of the military operation. About $300 million short bitcoin positions were liquidated, Coinglass data showed, while Singapore-based QCP Capital said “a good portion” of leveraged long positions had been taken out.
Trading volumes between the rouble and cryptocurrencies hit $141 million, a three-fold week-on-week increase according to Reuters. Major exchanges are betting that their controls are strong enough to keep processing legitimate transactions while blocking any activity linked to sanctioned oligarchs or companies.

Bitcoin could be a potential safe haven for Russian oligarchs avoiding sanctions as there will be no censor on the Bitcoin network and on cryptocurrency transactions,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Cryptocurrencies could act as a powerful store of value for a major part of holdings that don’t need to be liquid.”

“It’s still largely been correlated with U.S. equities throughout this crisis,” Joseph Edwards, head of financial strategy at crypto firm Solrise Group, said of bitcoin.

Fear and Greed index also shows that investors are coming out of the stunning effect. 

Price Forecasts

(Bloomberg)— Bitcoin is tracing a pattern that suggests the world’s largest digital token could build on its recent gains. A so-called triangle shape on Bitcoin’s price chart is squeezing tighter, and the cryptocurrency is jabbing at the upper end of the triangle. That suggests a momentum tailwind for Bitcoin, and if it breaks a high of $45,300 from early March, targets of $50,450 and $54,000 come into play based on the popular technical analysis technique of Fibonacci extensions.

Nigel Green is expecting Bitcoin to hit $50,000 this month, amid rising geopolitical tensions and growing institutional investments. Do you think the crypto coin can reach the $50k mark? PressRelease

— deVere Group (@deveregroup) March 1, 2022

BlackRock’s Fink says Russia-US crisis could accelerate digital currencies

In a letter to the shareholders of the world’s largest asset manager, Fink said the war will push countries to reassess currency dependencies, and that BlackRock was studying digital currencies and stablecoins due to increased client interest.

“A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption”, he said.

That appeared to strike a different tone from May of last year, when Fink raised some concerns around volatility and said it was too early to determine whether cryptocurrencies were just a speculative trading tool.

In the letter on Thursday, the chairman and CEO of the $10 trillion asset manager said the Russia-US crisis had put an end to the globalization forces at work over the past 30 years.

Mike McGlone, Bloomberg Intelligence – Bitcoin showing divergent strength vs. Nasdaq

Our graphic depicts Bitcoin potentially building a base of around $40,000 vs. the declining Nasdaq 100. If the index recovers, past patterns portend that Bitcoin will rise at a greater velocity. What’s significant is the crypto may be holding the line at key support vs. the stock market pressing lower.

Bitcoin May Revisit $30,000, But What of Stocks?

Our graphic depicts two key Bitcoin trends that appear enduring: beating the Nasdaq 100 stock index and declining relative volatility. At about 3x the 260-day volatility of the Nasdaq 100, this Bitcoin risk metric compares with almost 9x in December 2017, when futures on the crypto were launched.

Not partially allocating to Bitcoin as it progresses into the mainstream may remain the greater risk for most asset managers. We expect 2022 to be a good test, and if the stock market enters an elusive bear market, Bitcoin appears poised to gain an upper hand.

Bitcoin Divergent Strength vs. the Stock Market

Our key takeaway from the graphic is elevated mean-reversion risks from the Producer Price Index year-over-year spiking above 2008 levels and the Nasdaq 100 behaving similarly vs. its 60-month moving average. If risk assets don’t decline and reduce some of the price pressure, inflation measures are more likely to remain buoyant, leaving few options for central banks but to raise rates more aggressively.

Not since the recovery in 2009 from the financial crisis has the stock index traded below its five-year mean. Some additional reversion may seem like a crash.

Inflation Unlikely to Drop Unless Risk Assets Do

Glassnode: High Volatility Is On the Horizon

Bitcoin futures and options markets are pricing in higher volatility in the near future. Meanwhile, on-chain activity remains firmly in bear market territory, but continues to recover meaningfully.

  • Current buy side demand appears to be dominated by US and EU markets, with the majority of sell-side sources during Asian trading hours.
  • Bitcoin network utilisation and on-chain activity remains firmly within bear market territory, albeit is recovering. A sustained upwards impulse in network activity would likely be constructive, whilst deterioration likely favours the bears.
  • The amount of BTC supply absorbed during the current drawdown is similar in magnitude to the period after the March 2020 sell-off. However it remains modest at best, and is a key metric to keep an eye on in coming weeks.
  • Derivatives markets are currently pricing in historically low implied volatility, and futures premiums. Such market structure has historically preceded periods of very high volatility, and most often to the upside.

We can clearly see the accelerated growth rate in new on-chain entities a bull (blue), followed by a heavy collapse at the start of a bear (pink). Bear markets are characterised by a fairly persistent grind higher in new entities entering the Bitcoin network.

The current rate of 110k new on-chain entities per day is similar to the peak of the 2019 mini-bull, and is on a modest upwards trajectory.

A similar trend is observable in transaction counts, although the current rate of 215k Tx/day is lower that what was observed throughout 2019.

The futures market term structure remains either flat, or in backwardation for all exchanges through to April, with only a 4.46% annualized premium priced out to years-end.

Options implied volatility is coming off relatively low levels between 60% and 80%, which have historically been followed by periods of extremely high volatility. Such high volatility events in 2021 include the May sell-off, the short-squeeze in July, and the October rally to ATHs.


Previously guys, we already pointed that recent BTC action breaks the logic of fundamental principles and without external support, the coin should keep going down, as it was in January and February of 2022. With these two months performance was absolutely logical, when correlation between stocks and cryptocurrencies increases. And this is understandable. When you have dividend stocks that pay 2.5-4% or bonds with the same yield, it is unreasonable to watch for non-interest bearing asset, such as Bitcoin and with 10 times greater volatility. Especially, in the environment of high inflation and anticipation of rate hiking cycle until 2024 and terminal rate around 2.8-3%.

But, with starting of military operation something has changed drastically. After solid collapse, first we’ve seen 2-days explosive rally. Despite it has been reversal as fast as it has happened, the following gradual and slow upward action was telling that environment has changed. All fears around inflation and interest rate cycle haven’t changed. Thus, economical background remains unchanged. But what the reason was and is for starting of upward action?

Maybe be we have too narrow view on going process, but we can’t find any other explanation but cross-border money flows. The occasional spike was the first bell from russian oligarchs who were trying to safe capitals from imposed sanctions until it is possible. But the following gradual action is the money of EU investors. The sanctions scale was tighted gradually, starting from personal sanctions,  companies run, then SWIFT close, following up to the US oil import embargo and with the gas on the horizon. This also gradually increases investors’ concern on how safe to keep capitals in EU. And we suggest that current BTC rally is based mostly on EU capitals inflow. Whether it continues? No doubts. EU is just barely entering into new economical environment, when the sanctions fruits are just starting to appear. In May-June, impact should become evident and in sohrt-term period we expect continuation of upside action.

But once EU money are over and US inflation fears return back on the first stage, the economical justice should be met again. That’s being said, despite how cynic it might sounds, but BTC has got lucky with the events that we have. this effect should last for some more time and this is the reason why we consider $55K as the next target. But, as fundamental background in the US economy remains bearish, we can’t treat current upside action as fundamentally justified new bullish trend.

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Sive Morten

Sive Morten

By day Sive Morten works for the large European bank. In that roll he evaluates the markets including currencies market managing bank risks and evaluating the bank portfolio.

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