Market Wrap: Bitcoin Dips; Trading Range Could Result in Sharp Price Swings

Bitcoin (BTC) remained below $40,000 on Monday as selling pressure intensified. Equities also traded lower amid Russia’s increasing attacks on Ukraine.

Talks among U.S. officials of a potential ban on Russian oil imports triggered a surge in energy prices over the past few days. Higher prices at the pump could lead to slower economic growth and lower stock prices.

In crypto markets, bitcoin was down 3% over the past 24 hours, compared to a 5% drop in ether (ETH). Trading volume remains low, and analysts noticed a loss of short-term buying pressure, which could point to limited upside in prices.

Still, sentiment and technical indicators are neutral, which typically precede a pickup in volatility.

Bitcoin’s year-long trading range between $28,000 and $69,000 has been eventful. A mix of economic, regulatory and geopolitical headlines triggered 20%-50% price swings, which left some buyers on the sidelines.

Typically, price ranges benefit short-term traders who enter positions at support and resistance levels, aiming to profit when the price returns to its midpoint.

The chart below shows the most recent price range between $34,000 and $45,000. Peaks in trading volume are seen at support/resistance, indicating a high level of activity with buying or selling strength. Additionally, transaction activity on the Bitcoin blockchain confirms spikes in supply and demand at key technical levels.

For now, some analysts expect the trading range to persist over the short term.

“Crypto markets will need to see a period of stabilization in the next two or three months before a more sustainable recovery can get under way,” David Duong, head of institutional research at Coinbase (COIN), wrote in a report. The next major move in crypto could occur once investors have greater clarity on central bank policy and geopolitical events, according to Duong.

Sentiment among crypto traders has been bearish throughout the recent price range.

The chart below shows the bitcoin Fear & Greed Index, which has remained in “fear” territory over the past three months, which could leave bitcoin vulnerable to volatility shocks. (The index runs from 0 to 100, with “fear” between 0 and 49 and “greed” between 50 and 100.)

“With prices trading sideways in recent weeks, a relative equilibrium has been established,” Glassnode, the crypto data firm, wrote in a blog post. “However, given the limited incoming fresh demand, this delicate balance can be disrupted by any significant degree of seller exhaustion, or conversely a re-invigoration of sellers.”

Fresh investment inflows into crypto funds tripled last week to the highest in almost three months, despite outflows from European products.

Digital-asset investment funds attracted $127 million of new money during the week through March 4, a report Monday from digital-asset manager CoinShares showed. The regional breakdown comprised $151 million of inflows in the Americas and outflows of $24 million in Europe.

Bitcoin funds saw inflows of $95 million last week, the most since early December. Meanwhile, ether funds saw minor inflows of $25 million, the most in 13 weeks.

Digital assets in the CoinDesk 20 ended the day lower.

There are no gainers in CoinDesk 20 today.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.