Bitcoin Fundamental Briefing, March 2023

Bitcoin Fundamental Briefing, March 2023

No doubts, the major topic that are interested everybody is for how long the BTC rally stand.  Optimists tell that this is major trend reversal and start seriously discussing of 50K, 60K and even 70K upside targets. While more careful traders still have some doubts, suggesting that rally might be temporal because of banking crisis and only on a background of cash re-distribution out of the banks in some assets. So, how we could check it? First is, we need to understand the argumentation of both sides and then take a look at dry numbers to find out what is going on here. 


The cryptocurrency flirted with breaching $29,000 for the first time since June. Bitcoin has rallied about 60% this year. That comes on the back of last year’s 64% decline.

“Wow, the market is reacting violently to the latest hike,” said Kevin March, founder of crypto prime brokerage platform Floating Point Group. There was a “huge volatility and volume spike as investors realize that there’s nothing stopping the Fed from continuing to hike rates if the affected mid-sized lenders are going to keep getting bailed out.”

The largest digital coin has gained roughly 25% since March 8, when signs first emerged of trouble around Silicon Valley Bank, which has since folded and ignited turmoil among other lenders.

Three US lenders — Silicon Valley Bank, Silvergate Capital Corp. and Signature Bank — have been embroiled in the current episode, with investors on the lookout for any others that might still be affected as regulators look to stem further fallout. The crisis of confidence has spread to Europe as well, where over the weekend UBS Group AG agreed to buy Credit Suisse Group AG for more than $3 billion in a government-brokered deal. Market-watchers say that it’s all helping Bitcoin rally.. 

Fed Whipsaws Bitcoin

Bitcoin pulled back from its highest price level since June and smaller cryptocurrencies slumped after the Federal Reserve’s interest-rate increase eased speculation that looser monetary policy would fuel demand for digital assets. The Federal Open Market Committee voted unanimously to increase its target for the federal funds rate to a range of 4.75% to 5%, the highest since September 2007, when rates were at their peak on the eve of the financial crisis. It’s the second straight rise of 25 basis points following a string of aggressive moves starting in March 2022, when rates were near zero.

With Bitcoin staging a staggering rally in recent days amid turmoil within the global banking system, its advocates are now turning to the coin’s next important milestone: $30,000. . It last traded at $30,000 during the meltdown of now bankrupt lender Celsius, also in June.

Those watching its new surge say some investors might be finding comfort in the idea that Bitcoin and other digital assets are out of reach of regulators and are outside the financial system, which in some ways isolates them from the issues affecting the broader bank sector.

“Intellectually, you could see that attractiveness to it where you don’t need to be worried about the Fed coming in,” said Chuck Cumello, president and chief executive officer of Essex Financial Services. “That’s not to say that Bitcoin doesn’t have a host of other issues that the average person should be worried about,” he said, “but that was one of its siren songs, that was one of the things that drove and attracted people to it, and I’m not surprised in any way, shape or form that it’s up in this kind of environment.”

“Bitcoin is on an absolute tear,” wrote a team at Kaiko led by Dessislava Aubert and Clara Medalie. “Market sentiment has undergone a dramatic reversal over the past week, bolstered by an ongoing banking crisis that has strengthened crypto’s original narrative among investors.” 

Research from the firm shows that crypto trading volumes reached their highest level since the FTX collapse at the end of last year.

relates to Bitcoin Fans Look to $30,000 as Next Target as Trouble Swirls Around Banks

 In an interview with Bloomberg News last year, the founders of Three Arrows Capital pointed to $30,000 as having been a pain-point for their fund once the token’s price broke below that level.

Yet, thanks to its quick uptick, Bitcoin is trading in technically overbought levels, points out Matt Maley, chief market strategist at Miller Tabak + Co., and that might make it more difficult for it to cross the critical point.

“Bitcoin has been an asset that has moved with liquidity flows in the past. With this crisis, the Fed injected liquidity last week, so I think the move has more to do with added liquidity than investors seeing Bitcoin as a flight-to-safety asset,” said Maley. “It’s getting overbought, so Bitcoin will have a tough time breaking above $30k as this crisis calms down.”


Despite jump in a trading volume, mentioned above, liquidity in crypto markets remains desiccated. One measure of how easily the largest cryptocurrency can be bought or sold has fallen to 10-month lows, according to Conor Ryder at Kaiko. The liquidity dropoff is happening due to the firms that buy and sell crypto losing access to dollar-payment systems.

“Liquidity on US exchanges and USD pairs in particular have been hardest hit thanks to the banking fears,” Ryder said. “It looks as if a big reason for the latest price rally in BTC was due to illiquidity, when depth is low, there is less support to not only the downside but also the upside as well.”  

“Until some clarity appears in the US, we can probably expect more volatility in the short term, until we get that injection of liquidity that markets need,” Ryder said.  

The ebb in liquidity has happened as Silvergate Capital Corp. and Signature Bank, which had deep connections to the crypto industry, have folded in recent weeks, with market-watchers on edge for any additional fallout or turbulence. Many digital-asset firms had banked with those lenders, while exchanges had relied on their services for real-time payments, among other things. 

 it’s unclear whether the coin is acting as a safe-haven asset or is “simply reacting to expectations of potentially lower interest rates, wrote K33’s Torbjørn Bull Jenssen, Bendik Schei and Anders Helseth in a note this week

Yet, they said, Bitcoin continues to move like a high-beta risk asset — the Nasdaq 100, for instance, has also rallied in recent weeks. “On the other hand, Bitcoin has strongly outperformed Nasdaq, gained market share relative to even higher risk crypto assets, and has risen together with gold, perceived as a classical safe haven asset,” they wrote.

Treasury Secretary Janet Yellen convened the heads of top US financial regulators March 24th for a meeting of the Financial Stability Oversight Council. Deutsche Bank become the latest focus of the turmoil as concern about the industry sent its shares slumping. Lenders also came under pressure as Bloomberg News reported that Credit Suisse and UBS are among the firms under scrutiny in a US Justice Department probe into whether bankers helped Russian oligarchs evade sanctions.

The SEC has made it clear, over and over again, that it thinks almost all crypto tokens (except Bitcoin, Ethereum 1  and maybe a handful of others) are “securities” within the meaning of US securities law, and if you run an exchange for trading securities you need to register it with the SEC and comply with a lot of rules. 2

The Commission recently proposed a new safeguarding rule for investment advisors, building on the current, 2009 custody rule.[5] The proposal takes up Congress’s 2010 provision for us to expand the custody rule to cover all of an investor’s assets, not just their funds or securities. Congress granted us new authorities to expand the custody rule in response to the financial crisis and Bernie Madoff’s frauds. The expanded custody rule would help ensure that advisers don’t inappropriately use, abuse, or lose investors’ assets.

I know there’s been recent attention to this proposal regarding its intersection with crypto.

Make no mistake: Our current custody rule, adopted in 2009, covers a significant amount of crypto assets.[6] Advisers, in complying with the current custody rule, are required to safeguard investors’ crypto funds and securities with qualified custodians.

Coinbase does not run an SEC-registered securities exchange, but it offers trading in a few hundred crypto tokens. Coinbase thinks that none of them are securities, but what are the chances that the SEC agrees?

Now CFTC comes either – CFTC files lawsuit against Binance and its CEO. The largest crypto exchange in the world systematically violates US law, the Commodity Futures Trading Commission said in Chicago federal court.

Regulatory uncertainty in the crypto industry is getting worse. Instead of developing a regulatory framework for crypto, the SEC is continuing to regulate by enforcement only.

The Securities and Exchange Commission announced charges against crypto asset entrepreneur Justin Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). The SEC also charged Sun and his companies with fraudulently manipulating the secondary market for TRX

The company of Twitter founder Jack Dorsey, the Block payment system, has big () problems: the number of users was fake and 40-75% were formed from fake, fraud-related or linked to the same individual accounts. (For example, there were hundreds of Elon Musks and Donald Trumps)

This was found out in an investigation by Hindenburg Research . Analysts found that the company made it easy for attackers to create multiple accounts and then quickly monetize the stolen funds.

The widespread spread of digital assets can lead to the loss of deposits by banks and a decrease in lending. This is stated in the report of the International Monetary Fund (IMF).

“The widespread adoption of cryptocurrencies involves significant risks for the effectiveness of monetary policy, exchange rate management and capital flows, as well as for fiscal sustainability,” the report says.

Finally, U.S. President Joe Biden’s proposed budget, set to be unveiled Thursday, will include a provision to close tax loss harvesting on crypto transactions.

A White House official confirmed the budget will include a tax provision intended to reduce wash sales trading by crypto investors. At present, investors can sell any cryptocurrencies at a loss, claim the loss on their taxes and then buy the same amount and type of cryptocurrencies again.

According to the Wall Street Journal, the provision would be expected to raise up $24 billion.


Key charts suggest any hiatus or pullback is likely a temporary speed bump on the way to further gains.

Up, Up and Away | Bitcoin is having its best quarter since 2021, the token's record year

A $300 billion increase in the Federal Reserve’s balance sheet last week — part of efforts to support liquidity in the US banking sector — is positive for risk assets and has aided crypto and gold, Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.

Head and Shoulders | Bitcoin traced bullish reverse head-and-shoulders with price objective near $35,000

Bitcoin has traced a reverse head-and-shoulders, a pattern often viewed as bullish. The technical study indicates a price objective of about $35,000. “With interest-rate markets gone from pricing in rate hikes to pricing in rate cuts, there is now a gentle tailwind supporting Bitcoin,” Tony Sycamore, market analyst at IG Australia Pty, wrote in a note.

Bullish Break | Token reclaiming weekly Ichimoku cloud is optimistic sign for some analysts

Bitcoin has jumped into an area marked by a weekly Ichimoku cloud, an indicator that uses mathematical formulas to help define levels of resistance and support. The break into the cloud signals the potential for further increases. The token could “ride the narrative as a system hedge” and draw succor from central banks being forced to inject liquidity to tackle bank-sector wobbles, Bendik Schei, head of research at K33, wrote in a note.

Bitcoin's DeMARK Red Flag | Study flashes signal which makes tactical retreat likely

The DeMARK Sequential indicator — a method of analyzing price momentum that tries to anticipate when a market trend has run its course — is flashing red. The study uses a system of counting applied to chart patterns and has printed a 9 count that likely presages a pullback, according to the analysis. DeMARK indicators support a neutral short-term bias but other chart patterns could soon point to a “long-term breakout,” Katie Stockton, founder of Fairlead Strategies LLC, wrote in a note.

Bitcoin at $100,000? Insiders say the cryptocurrency could test new highs this year

Marshall Beard, chief strategy officer at U.S.-headquartered cryptocurrency exchange Gemini, said $100,000 could be a possibility for bitcoin.

“I think bitcoin probably breaks all-time highs this year,” Beard said, adding that the $100,000 price figure is an “interesting number. If bitcoin gets to its previous record high of near $69,000, “it doesn’t take much more for it to lift up” to $100,000.

Fear & Greed index stands almost neutral, showing that market is slightly greedy (59/100), keeping room as for possible downside reversal as for upside continuation. Many traders use it as oscillator to identify reversal moments.

Glassnode – In response to the strong price appreciation over recent weeks, investors have increased the volume of coins deposited to exchanges. Net exchange flows ticked higher by approximately 4.18k BTC this week, the largest net increase since LUNA collapsed in May 2022.

This suggests a degree of profit taking is underway, as investors take chips off the table. Prior instances with similar or larger net inflows over the last cycle, have all aligned with major market volatility events, usually to the downside.

Recalling the shape of the Yearly average of Realized Profits, we can see a very similar shape and relationship exists with Liveliness, largely since they describe similar market behaviors:

  • During bull markets, longer-term investors spend long dormant coins and realized large profits. This eventually leads to an over-supply and setting a macro market top.
  • During bear markets, longer-term investors return to a slow accumulation strategy, and there are fewer profits taken day to day. This eventually establishes a cycle floor.

At present, we can see both metrics remain in macro downtrends, suggesting the majority of coins remains inactive on-chain.

As the Bitcoin market takes a break, profit taking by investors is starting to warm up. Short-Term Holders who accumulated near the cycle lows dominate the majority of spending behavior, although their willingness to hold coins for longer periods is evident. 

Overall, the majority of BTC appears to be quite inactive on-chain, suggesting investors continue to have confidence in the prevailing uptrend. Bitcoin again appears to be entering a transitional market period.


It is easy to understand reasons of cryptocurrency investors. They are on a surface. In general it could be described as “Finally!”. And repeating of the same mantras of “crypto is protection against inflation”, “the gold replacement”, “new safe haven” etc. It is clear what cryptocurrencies fans want and how they treat current rally. They would be absolutely happy if all public bank deposits flow into cryptocurrencies, institutional investors recognize huge upside potential and put all money back in the market etc.

But before throw away all doubts and make a deep dive in cryptocurrencies investments – we would ask you, what Fed and US Treasury want? Why they have initiated this crisis? Yes, we think it was planned and managed intentionally. And not occasionally victims like SVB and Republic have tight relation to crypto industry.  But, of course, not this point is the major one.

Fed was needed the precedent, the formal reason to take a breath (or even to stop) on a way of rate hike cycle, and QT, because they see how the US economy is crashing and economy activity is slowing down. Real economy sector (production, manufacturing) is becoming under funded, as nobody wants to provide loans for cheap and for too long. While banking sector  start getting big unrealized losses. And this is with the lag of 6-9 month on rate level reaction. Yes, the 5% level impact is yet to come. Now we have impact of ~3-3.5% rate level.

Fed is trying to resolve two major problems – stabilize banking sector and get some cash to plug holes in rising budget deficit/negative trade balance, national debt service (interest expenses) and its refinancing difficulties – yes, nobody wants to buy new US Treasury issues. China relationships are broken, EU and Japan nave negative current accounts, i.e. they have no money to invest.

With this new BTFD programme, Fed provides cash at ~4% to the banks, supposedly for one year, but more probable that this term will be extended. QT is reversed back – new $450Bln have been printed in just a week or two. Obviously after summer time pause, inflation should keep rising, or, not dropping, at least. Meantime, long-term rates are lower than the short-term, as well as real rates remain negative. Where banks should invest liquidity from the Fed? And how they have to pay this 4%? Besides, to stop clients’ raid, banks have to keep paying high percent on the deposit rates.

To achieve all these stuff, Fed has to rise somehow long-term rates.  It needs to rise long term inflation expectations. We do not consider “right decisions” which is  shock therapy of crushing the US economy and put country in real insolvency crisis. Hence, the only way is to keep printing. 

Simultaneously they will keep rise the rate. The point is – they can’t cut it drastically now. And from this point of view – it makes no sense to hold around 5%. The negative effect of high rate is already here. Stop “inflation fighting” could break the game. Thus, the Fed will keep hiking with small pace, 0.25%, but meeting to meeting – we agree with BlackRock. Not occasionally we put it in our research. 

High rates will attract all cash on the bond market – out of stocks, and…yes, out of crypto, when dust of banking sector panic will settle a bit.  Do you know that In 2022, American households invested an unprecedented amount of financial resources into bonds – over 1.5 trillion per year, compensating Fed’s and foreign investors’ out. In monetary terms, this is an absolute record in history, and relative to household income – 8.3% of the total annual income from all sources

There are only two triggers when the population in the US buys bonds – these are financial/economic crises (in 2008-2010) and the rate differential between bonds and deposits (2018-2019 and 2022). The population withdrew 365 billion from deposits in Q4 2022 – an absolute record, an incredible flight from monetary assets that has no analogues in history.

That’s being said, the stability of the debt market in the face of negative real rates and sales from the Fed is supported by the US population, and the resource is the sale of shares and withdrawal of funds from deposits.

And this tendency will continue, and even accelerate as rate will be increased more. People keep running into US bonds. 

And now try to answer what people are going to sell first – cryptocurrencies or stocks (dividend stocks)? And whether Fed has started all this stuff to make crypto markets happy, or to guarantee them free cash for growth? I have big doubts about it. The Fed wants this cash for itself. While SEC and G. Gensler should help to manage this cash in right hands. And they will get it. 

We treat recent BTC rally as technical issue of cash temporal re-distribution just out from bank deposits. But very soon people start to think where to invest it. Once cash flow starts exhaust, the rally will loose the pace and massive profit taking starts (maybe it is already starting). 

That’s why, we consider 35K area on BTC as potential ultimate target of upside action, but do not exclude the scenario where downturn starts right from nearest 29-30K resistance area. 

Crypto spring? We’re not sure, maybe just thaw.

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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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