Bitcoin ended the first day of spring on a bullish note and completely absorbed the bearish volumes of February 28. At the same time, the cryptocurrency failed to successfully retest the $24k level, where there is a strong resistance area.
This means that the asset will continue to move within the $22.5k–$23.8k range. Despite the continued accumulation of BTC coins, the low activity of institutional investors does not allow the asset to resume its upward movement and gain a foothold above $24k.
Signals for the cryptocurrency's decline are increasing day by day, as bullish sentiment in the stock market is falling. At the same time, the value of U.S. Treasury yields and the strength of the USD are rising, which creates conditions for the emergence of a downward trend.
SPX and DXY
The price of the S&P 500 index has been moving sideways for more than a year without significant price changes. Recently, asset quotes rebounded from the upper boundary, which may indicate further movement to the lower boundary of the fluctuation channel.
According to Citi, market sentiment towards stocks is becoming increasingly bearish. There is an active set of short positions among investors in the European Union and the United States.
Moody's also notes that, despite positive forecasts, the U.S. economy is expected to contract in the second half of the year. Analysts predict a 1% decline in real GDP in the third and fourth quarters of 2023.
All these factors point to the likelihood of another stage of liquidity reduction in the markets and a drop in investment activity. The ECB has already announced a $15 billion withdrawal from the economy and will continue to do so. Recall that the Fed withdraws about $95 billion monthly.
Given the massive withdrawal of liquidity from the economy and the tightening of monetary policy by raising the rate, investors need a profitable but safe instrument. Over the past month, the U.S. Dollar Index has gained a second wind and looks strong on the weekly timeframe.
First of all, the increased attention to DXY is due to increased investment in U.S. Treasury yields, which account for more than 50% of USD collateral. Given the expected deterioration in the coming months, another local bullish trend awaits DXY.
It is important to note here that Bitcoin has a high level of correlation with SPX and stock indices. At the same time, the situation in the autumn of 2022 showed that with the growth of DXY, high-risk assets fall. Therefore, if the current market situation persists or worsens in the coming months, you can count on the lateral movement of BTC.
BTC/USD Analysis
Over the last seven days, Bitcoin has lost 7% of its capitalization, and in the last 24 hours, it has declined minimally by 1.5%. As of writing, the asset is trading around $23.5k after a failed retest of the $23.8k–$24.4k resistance area.
Bitcoin has been moving within the $22.7k–$23.8k fluctuation corridor for the past week. The cryptocurrency lacks buying volumes to successfully break through the $23.8k–$24.4k resistance area. There are no signals or reasons for a sharp increase in trading activity on the crypto market, and therefore, BTC will continue to move in a flat.
It is important to once again emphasize the strong correlation between BTC and SPX, which will strengthen as the market deteriorates. The S&P 500 index fell to $3,951, while Bitcoin continues to move flat. The fall in SPX outpaces the movement of the price of the cryptocurrency by several days, so it is likely that we are in for a wave of BTC decline.
Results
As of March 2, there are no signs of an up/down movement in the Bitcoin market. Given the correlation with SPX, we can assume that the asset expects a local decline within the $22.7k–$23.8k range. Sharp price movements in the price of BTC are not expected due to low trading activity in the market.
