Recently, after surpassing $60,000 and reaching another record high, bitcoin underwent a slight correction and is now maintaining a stable rebound. US President Biden’s massive economic stimulus package and a statement by the Federal Open Market Committee (FOMC) that it will maintain ‘zero interest’ are considered some of the main drivers for bitcoin’s regained stability. President Biden’s $1.9 trillion economic stimulus package recently passed the Senate. This amounts to 13% of the US’ Gross Domestic Product (GDP) and is expected to continue supplying liquidity to investment markets.
At the same time, the FOMC has repeatedly released statements reaffirming its commitment to maintaining the interest rate near zero. US Federal Reserve Chair Jerome Powell dismissed inflation concerns even as the US’ growth forecast is greatly improving. He pointed out that the inflation level in the US economy was not sustained or real enough to justify a change in the Fed’s policy. Powell added that the Fed would also not taper its quantitative easing by reducing bond purchases on the market. He stressed that even if inflation temporarily went past 2%, the zero interest policy would not change. In the same address, the Fed Chairman presented a 6.4% growth outlook for the US economy due to the effects of the COVID-19 vaccine and economic stimulus policy. If this comes true, following 1984 it would be the largest growth in 37 years.
Both the NYSE and crypto markets gained steam following these statements. The cautious atmosphere on investment markets, marked by concerns over a possible interest rate hike, also reversed. Even without any active market interventions, stock prices climbed, and bond yields fell as global financial markets regained stability. With low interest rates and an additional influx of liquidity, money is expected to flood into investment markets. After the Fed’s statement, the bitcoin price also started climbing. On noon of March 18, bitcoin soared by around 8% to reach $59,000.
On the 14th, CNN reported that “President Biden’s large-scale economic stimulus policy has revived fears of inflation. Some are concerned that the economy might overheat in some sectors and inflation grows much larger”, adding “Especially now that many people are returning to work with the COVID-19 vaccine, the economy will pick up steam and the price of bitcoin, which is considered rarer than gold or other precious metals, will climb”.
On the 11th, the European Central Bank (ECB) also affirmed at its monetary policy meeting that it would keep the interest rate at 0% and accelerate its purchase of bonds. The ECB concluded that if market interest climbs above current levels, liquidity on the market would decrease and stock prices would also be greatly affected. The ECB explained that its decision was aimed at preventing this risk. With these ECB measures, liquidity is also expected to grow on the European markets in the short term.
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The bitcoin bull run may continue
Bitcoin has not shown any concrete patterns pointing to a rise or fall and experts are debating various possible directions. What is clear from the charts is that so far, bitcoin’s upward trend has not broken, and with the Fed maintaining interest rates and liquidity expansion, the majority opinion is that further price increases are likely.
Cryptocurrency analyst Aayush Jindal concluded “Bitcoin price gained bullish momentum above the $57,000 resistance against the US Dollar. BTC is now trading nicely above $58,000 and it is likely to continue higher. […] There was a break above a major bearish trend line with resistance near $57,500. […] [bitcoin] is likely to continue higher towards the $60,000 and $60,500 levels in the near term. BTC broke many hurdles near $57,000 and $58,000 to move into a positive zone”
Rakesh Upadhyay, another cryptocurrency analyst, took a more cautious view, advising: “Traders should also keep an eye on the price of Bitcoin (BTC). In a bull market, every positive development is cheered by a sharp rise in price. However, when the price stops reacting positively to favorable news, it is a sign of exhaustion. That does not guarantee a change in trend, but being watchful could safeguard traders from short-term pain”. On the price of bitcoin, he stated: “Bitcoin rebounded off the 20-day exponential moving average ($53,739) on March 16 but the bulls are struggling to hold on to higher levels. This suggests profit-booking by traders on minor rallies. However, if the bulls again defend the 20-day EMA, […] that could result in a move back to the all-time high at $61,825.84. A breakout of this resistance will signal the possible start of the next leg of the up-move that may reach $72,112. Contrary to this assumption, if the bears can sink and sustain the price below the 20-day EMA, […] the BTC/USD pair could then drop to the 50-day simple moving average ($47,451)”.
The specialist cryptocurrency media outlet Coindesk finds: “The Federal Reserve has strengthened bitcoin’s appeal as an inflation hedge, opening doors for a continued price rally. Bitcoin’s bull run looks set to continue after the Federal Reserve reconfirmed its pro-stimulus stance this week.”
Meanwhile, CryptoQuant CEO Ki Young Ju opined that the start of another bull run would take more time. As he wrote on Twitter “I think $BTC would take some time to get another leg up in terms of demand/supply. Too many $BTC holdings in USD compared to stablecoin holdings on spot exchanges.” Because the stablecoin volume on exchanges is gradually being exhausted, Ki Young Ju considers that the buying trend will taper off and the bull run will also come to an end. According to his analysis, because purchasing bitcoin first requires purchasing a stable coin tied to the dollar, if stablecoins become exhausted on exchanges, the market entry of further investors will necessarily slow.
How to realize steady profits in a volatile market
bitcoin is catching breath in preparation for its next climb. With the Biden administration’s economic stimulus policy and the Fed’s low-interest rate, expectations are that the bitcoin price will continue to rise. However, even with a long-term rise, investors need to be cautious as they can incur short-term losses if they do not respond effectively. This is because even during a further price increase, there might be great intermittent volatility.
Some experts are advising investors to play it safe by focusing their portfolio on cash in the short term and then responding after checking in which direction the market is moving. If it is difficult to respond to the crypto market’s increasing volatility and liquidity, then using a cryptocurrency investment product to generate steady returns can also be an effective investment strategy.
Haru operates a range of investment products that automatically pay interest if investors simply deposit cryptocurrency. On cryptocurrency asset management platform Haru, professional traders use algorithmic futures market trading and hedging strategies to increase earnings on behalf of users. Haru offers services providing interest on bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Tera (KRT) deposits. The main product, cryptocurrency fund Haru Invest (BTC), has a 25% interest payout target at maturity when locking up Bitcoin for 3 months. Haru Invest only charges a performance fee of 15% of total profit if the annualized earning rate is at least 15%. The minimum lock-up period is 1 month, which can be extended if the user wants.