Bitcoin (BTC) has recovered slightly from its monthly lows but remains unable to break past the key $85,000 resistance. On Saturday, BTC climbed to $84,525, marking a 10% rebound from its lowest level this month. However, it’s still in a local bear market, down 22% from its yearly high.
As of now, Bitcoin is trading around $84,335, mirroring slight gains in stocks and gold.
Bitcoin Faces Potential Risks
While Bitcoin’s price has rebounded, two major risks could stall further growth.
1. Fear Still Lingers in the Market
Investor sentiment remains weak. The Fear and Greed Index has moved up from extreme fear (18) to 22, but fear still dominates. Historically, Bitcoin performs best when investors shift toward greed.
This cautious sentiment is evident in spot Bitcoin ETFs, which lost $143 million in assets last week, bringing total weekly outflows to $870 million. This marks the fifth consecutive week of withdrawals.
2. Bearish Technical Signals
Bitcoin has formed a death cross, where the 50-day and 200-day Weighted Moving Averages (WMAs) intersect. This pattern often signals further downside. If the trend continues, BTC could retest the $73,900 level, last seen in March 2024.
Potential Upside for Bitcoin
Despite these risks, two key opportunities could fuel Bitcoin’s next rally.
1. Federal Reserve Policy Shift
The Federal Reserve’s next meeting on March 18-19 will be crucial. If recession fears grow, the Fed may adopt a dovish stance and hint at interest rate cuts. This would be bullish for Bitcoin, as lower rates typically drive demand for risk assets like crypto.
2. Investors May Buy the Dip
Market sentiment could shift toward a risk-on approach, encouraging investors to buy the dip in both stocks and crypto. The stock market has already priced in extreme risks, leading to trillions in lost value.
A similar trend occurred in March 2020, when markets crashed due to COVID-19 panic but later rebounded after the Fed introduced aggressive stimulus measures. A repeat of this scenario could push Bitcoin higher.
Final Thoughts
Bitcoin is at a critical point. While technical indicators suggest further downside, macroeconomic factors like Federal Reserve policy and investor sentiment could reverse the trend. If BTC breaks above $85,000, a strong rally may follow. However, failure to hold current levels could lead to a retest of $73,900.
