Bitcoin (BTC) price is begining to lean south after a multi-day consolidation, with bearish forces coming from, among others, recent reports that the European Central Bank (ECB) does not belive in the convinience of BTC.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
European Central Bank tears down Bitcoin
In a Thursday blog titled “ETF approval for Bitcoin – the naked emperor’s new clothes”, the European Central Bank (ECB) detailed an analysis of the Bitcoin market, saying that the king of cryptocurrency “has failed on the promise to be a global decentralized digital currency,” adding that BTC “is still hardly used for legitimate transfers.”
The blog also argues that despite the landmark approval of spot BTC exchange-traded funds (ETFs) on January 10, BTC is still not suitable as a means of payment or as an investment. The ECB contravenes the general opinion among crypto proponents that ETF approvals validate BTC as a safe investment.
The Central Bank also said that the preceding rally seen in Bitcoin price following the approvals is proof of an unstoppable triumph is false, highlighting that the fair value of Bitcoin remains zero.
We disagree with both claims and reiterate that the fair value of Bitcoin is still zero…the use of ETFs as financing vehicles does not change the fair value of the underlying assets.
The ECB says that there is a worst-case scenario where Bitcoin’s expected boom fails, urging traders to brace for massive collateral damage, including the “ultimate redistribution of wealth at the expense of the less sophisticated.”
Debunking the “false promises of Bitcoin” and warning of the social dangers if not effectively addressed, the blog argued:
- Bitcoin has not lived up to its original promise to become a global decentralized digital currency.
- Bitcoin’s promise to be a financial asset whose value would inevitably continue to rise is equally wrong.
- Bitcoin transactions are still inconvenient, slow, and costly.
- Bitcoin is still not suitable as an investment.
- Bitcoin mining using the proof of work (PoW) mechanism pollutes the environment on the same scale as entire countries.
- Increased Bitcoin prices imply higher energy consumption because then miners are able to cover higher costs.
Further, the ECB report acknowledges that while Bitcoin price is gaining as hope grows the Fed could lower interest rates and increase the risk appetite of investors. Then again, the report says, “This could turn out to be a flash in the pan.”
Bitcoin price outlook as the ECB wrecks and demolishes BTC
Meanwhile, as Bitcoin price’s horizontal consolidation continues, the market is slowly leaning to the downside. The price is testing the immediate support at $51,335 and could break below it as multiple technical indicators flash bearish.
To start with, the Relative Strength Index (RSI) has already executed a sell signal by crossing below its signal line (yellow band). The Moving Average Convergence Divergence (MACD) is also teasing with a potential bearish crossover below its signal line (orange line).
In addition, the histogram bars of the MACD are also fading as they edge toward negative territory. The same outlook is seen with the Awesome Oscillator (AO) histogram bars, flashing red as they edge toward the mean line.
If the $51,335 support gives in, Bitcoin price could drop, first losing the $50,000 milestone as support with the possibility of extending to the $48,000 level. In a dire case, the fall could see BTC retrace the $40,000 psychological level, almost 23% below current levels.
Also Read: Bitcoin back over $51K, crypto market recovers as Nvidia’s earnings rejuvenates AI-tokens
BTC/USDT 1-day chart
On the other hand, increased buying pressure could see Bitcoin price reclaim its range high of $52,985, last tested on February 20. Clearing this blockade could set the pace for Bitcoin price to extend past the $53,000 level. A break and close above this level would make $60,000 the next target for BTC. A test of this psychological level would denote a 17% climb above current levels.
