With the panic sell-off brought about by US stocks, the futures market has also been very volatile. In fact, Bitcoin (BTC) dropped by nearly 10% in 6 hours, reversing the whole rally on May 5. And this plunge has also made more people apprehensive. At the time of writing, BTC is trading around USD 36,300, reaching a two-month low. This passage indicates that from the fundamental and technical aspects, BTC still faces challenges to resume the uptrend.
FED’s Policy Flip Restrains BTC Upward Movement
On May 4, after Fed’s Chairman Jerome Powell’s comment that it wasn’t likely to raise interest rates at an oversize 75 basis points, BTC soared in a relief rally and hit USD 40,000 for a short time. However, Powell also said that additional 50bps increases should be on the table at the next couple of meetings and the overarching focus is to bring inflation down to 2% goal. In the face of Fed’s increasing hawkish expectations and macroeconomic changes, BTC could yield further downside towards the low in Jan 24 (USD 32,900).
Positive Correlation Between Stocks and BTC
Stock markets saw huge losses on May 5 in post-Fed trading. The Dow dropped 1,120 points, or 3.3%, the S&P 500 fell 3.7%. The Nasdaq Composite tumbled 5.2%, its worst day since 2020. The rapid market changes indicate that the equities market is still heavily affected by the Fed’s policy decision. Higher interest rates can diminish the allure of technology stocks by reducing the value that investors place on their future earnings. Bonds with higher yields or safe haven assets like gold in general will be more attractive versus risky assets such as stocks and crypto.
What’s worth to be noting is that according to CryptoQuant’s statistics, S&P500 and BTC move in-line, and their positive correlation has reached a new peak in 2022, which means the sell off in stock market will somehow plummet BTC price as well.
On the daily chart, BTC breaks below the strong base at USD 37,000 level which formed since January. Now, BTC is trading near the lower bollinger band and shows no upward correction. In addition, BTC price drops below 23.6% Fib retracement level, MACD signal lines are trending lower below zero with negative histogram maintained, and RSI also breaks below 50, all indicators are pointing bearish bias. In the short-term, BTC will continue the downside movement to the previous low of USD 32,900 in January.
How to “Survive” in the BTC Bear Market?
So with all that, we can foresee that the BTC price will struggle in the rest of 2022 as central bank monetary tightening squeezes assets across the board. In such a large bear market, there are still people who have got a ROI of more than 1000%, and the secret to this is —- 100x leverage. In bear markets, traders can use leverage to maximize their profits in futures markets. Bexplus is a promising Bitcoin-based futures exchange, providing BTC, ETH and ADA, Doge and XRP perpetual futures contracts with up to 100x leverage. Unlike the spot trading which enables you to earn money only when BTC goes up, you can also make profits if BTC price drops.
For example, if you open a short position with 1 BTC when it prices at USD 36,500, added 100x leverage. When the price of Bitcoin declines to USD 33,000. The profit will be (USD 36,500 – USD 33,000) * 100 BTC/USD 33,000 *100% ≈ 10.6 BTC, making the ROI 1060%.