China’s 8% Stock Crash: Bitcoin Weekly Update

Bitcoin has started the first full week of February with a slight recovery, avoiding a breakdown below $42,000. The price action remains within a narrow range, with limited momentum to overcome selling pressure and challenge range highs. There is uncertainty about what lies ahead for the market as the block subsidy halving, which will cut miners’ rewards by 50%, approaches in about two-and-a-half months. Different perspectives on how the price will react before and after the halving are being discussed. Some believe that Bitcoin could break through resistance levels and reach a new all-time high before mid-April, while others expect no significant price action until months after the halving. Macro-economic risks, including turmoil in Chinese equities markets and uncertainty over the Federal Reserve’s economic policy, add to the uncertain outlook for BTC/USD. BTC price indicators, such as the Relative Strength Index (RSI) and Bollinger Bands, are showing signs of volatility, but the direction of the price movement is unclear. Some analysts predict that BTC may experience a sell-off after the halving, similar to the reaction to the launch of the first US spot Bitcoin exchange-traded funds (ETFs) in January. Others are more bullish and expect BTC to reach new all-time highs in the near future. Recent flows into BTC spot ETFs have been impressive, with asset managers BlackRock and Fidelity owning the majority of the BTC in US spot offerings. The Grayscale Bitcoin Trust (GBTC) continues to experience outflows as clients withdraw. Chinese equity markets have experienced significant volatility, with stocks hitting five-year lows and trading being halted for 30% of stocks on the CSI 1000 index. The China Securities Regulatory Commission has vowed to stabilize the market. This volatility in China could have a wider impact on global markets. In the US, there are debates about how the Federal Reserve will conduct a pivot in quantitative tightening (QT). While bets on the Fed lowering rates at its March meeting have decreased, concerns about the health of regional banks persist. Arthur Hayes, former CEO of BitMEX, predicts an initial capitulation in March, followed by a dramatic recovery in the BTC price, with a downside target of $30,000. Despite the rangebound BTC price, there have been notable shifts in whale population composition, with an increase in the number of wallets holding between 1,000 BTC and 10,000 BTC and a decrease in the number of wallets holding 100-1,000 BTC. These changes suggest that whales are preparing for a potential change in the market.