China’s Stock Market Plunge Triggers Crypto Volatility – What It Means for Bitcoin

Bitcoin (BTC) Kicks Off February with Escaping Breakdown Below $42,000

As the first full week of February begins, Bitcoin (BTC) has managed to avoid a breakdown below $42,000.

The price action of BTC remains confined within a tight range, with January’s gains limited to just 0.6%. What could be in store for the market next?

The bulls of Bitcoin are still struggling to gain the necessary momentum to overcome selling pressure and challenge the range’s upper limits.

The road ahead looks rough: the halving is only two-and-a-half months away, and opinions on how the price will react before and after vary greatly.

Some believe that significant changes are on the horizon and that Bitcoin may not only break through local resistance but also reach a new all-time high before the middle of April. Others believe that it will be “business as usual” with no major price movements until months after the halving.

In the background, there are ongoing macroeconomic risks, with fresh turmoil in Chinese equity markets this week.

Last week, US data caught the market off guard, raising questions about how the Federal Reserve’s economic policies may change, particularly in regards to the timing of interest rate cuts, which is a crucial issue for both crypto and risk assets.

This weekly rundown from Cointelegraph delves deeper into these topics and more, providing insights on what to keep an eye on when it comes to BTC/USD.

BTC price indicators predict potential for volatility

Bitcoin closed at $42,550 on Bitstamp for the second-highest weekly close of 2024.

Following this, BTC/USD attempted to sell off and retested $42,200 twice before bouncing back to around $600 higher at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.

This bid liquidity has maintained the current area of interest within a larger range that Bitcoin has been trading in for over 150 days.

In his latest analysis of the spot market, popular trader Skew noted that a limit bidder has protected overnight price action from further downside movement.

This is reminiscent of mid-January when Bitcoin dropped from its two-year high above $49,000. Skew also pointed out that $43,100 is the crucial level to surpass.

“Today, I’m looking for confirmation that the 1H/4H trend is holding and if buyers can maintain a move above $43.1K and the diagonal downtrend line,” Skew explained in another post on X (formerly Twitter).

The accompanying chart included features such as simple and exponential moving averages on the 4-hour chart, as well as the sloping resistance line.

Meanwhile, both the Relative Strength Index (RSI) and Bollinger Bands are showing signs that volatility may return.

On weekly timeframes, the RSI has “reset” to lower levels while the spot price has consolidated, as noted by analyst Matthew Hyland over the weekend.

The current weekly RSI stands at 68.9, just below the key level of 70 that often accompanies significant price increases.

The 3-day Bollinger Bands chart is also indicating a significant “squeeze,” with the Bands tighter than they have been since the end of October, according to Hyland.

As reported by Cointelegraph, tighter bands typically suggest that there will be a price expansion, but it is not yet clear in which direction.

Is Bitcoin on track for a pre-halving all-time high?

One of the main talking points in the Bitcoin community this year, as it is every four years, is the upcoming block subsidy halving.

Scheduled for April 18, this event will see the amount miners receive for each block they mine cut in half to 3.125 BTC.

While the halving is still over two months away, its potential impact on market sentiment is already being closely monitored and debated by experts. However, opinions on what could happen to BTC price action as a result vary greatly.

In a recent market update on February 2, Filbfilb, CEO and co-founder of trading suite DecenTrader, took a resigned stance. In his view, the halving will play out similarly to previous ones, with no significant price increases until several months after the event. He also predicts that the market will “sell the news” about the halving, much like it did when the first U.S. spot Bitcoin exchange-traded funds (ETFs) launched in January.

As reported by Cointelegraph, Filbfilb’s forecast is earlier than many mainstream BTC price predictions for reaching new all-time highs, which are typically in the fourth quarter of 2024.

However, Filbfilb’s outlook is in stark contrast to more optimistic voices who anticipate a challenge to BTC’s price records at or even before the halving.

“Let’s take a step back and consider how the next 30 to 60 days could unfold. Many people are worried about a dip, but I want to present the bullish scenario,” wrote popular investor Fred Krueger in an X post on February 4.

Krueger based his hypothesis on the rapid changes in netflows for the new ETFs, which consistently show decreasing selling pressure.

“In just 18 trading sessions, these ETFs have accumulated a total of 175K coins, worth 7.5 billion,” he calculated.

James Van Straten, research and data analyst at crypto insights firm CryptoSlate, drew parallels to recent gains in the market cap of Meta, to which Krueger responded that he “expects a surge” in Bitcoin’s own price.

Spot Bitcoin ETFs Gain Significant Amount of BTC

The recent inflows of ETFs have been quite impressive.

Globally, ETF products now hold over 3% of the total BTC supply, with BlackRock and Fidelity owning the majority of newly acquired BTC among U.S. spot offerings.

This does not include the Grayscale Bitcoin Trust (GBTC), which continues to experience significant outflows as clients withdraw their funds.

Despite this, both BlackRock and Fidelity made it into the top ten ETFs by inflows last month, even though they only launched on January 11.

ETF investment advisor Nate Geraci of Cointelegraph noted this development, stating, “I never thought I’d see the day.”

Previously, Cointelegraph reported on market observers playing a “wait and see” game when it comes to spot ETFs.

However, with the pressure from Grayscale easing, they believe that net outflows will eventually come to a halt.

Financial commentator Tedtalksmacro also believes that once the chart starts to show positive numbers, there will be no other narrative to sell except for some unknown event that is currently unknown.

China Pledges to Intervene as Stock Market Halts Trading

In addition to Bitcoin, this week’s relatively quiet economic data may bring some surprises.

China is now the center of volatility as stocks plummet to their lowest levels in five years and the CSI 1000 index drops 8%, causing trading to be suspended for 30% of listed companies.

This development follows Beijing’s efforts to inject liquidity into the market and the collapse of Evergrande, China’s second-largest property developer.

In a statement released on February 4th and quoted by Reuters, the China Securities Regulatory Commission (CSRC) stated that it will “maintain stability and confidence, and strongly resist abnormal market fluctuations.”

At the time of writing, the CSI 1000 has lost nearly 27% since the beginning of the year.

“China’s stock market finally seems to be catching up to its collapsing real estate market,” commented trading resource The Kobeissi Letter.

This sets the stage for a highly anticipated opening on Wall Street, as the US grapples with the question of how to implement quantitative tightening (QT).

As reported by Cointelegraph, expectations of the Fed lowering interest rates at its March meeting have decreased following last week’s surprisingly strong nonfarm payrolls data.

This week, unemployment figures will be added to the mix.

Meanwhile, concerns about the health of regional banks persist. In terms of its impact on Bitcoin and cryptocurrency, former BitMEX CEO Arthur Hayes predicts an initial capitulation in March, followed by a dramatic recovery in BTC price.

His downside target for BTC is $30,000.

Whales Rebalancing in Large Movements

Amidst a stagnant BTC price landscape, whales are actively preparing for change.

In their recent investigations, research firm Santiment discovered significant shifts in the composition of whale populations over the past week.

The number of wallets holding between 1,000 BTC and 10,000 BTC has reached its highest point since November 2022, while the number of wallets holding 100-1,000 BTC has dropped to its lowest point since then. Currently, there are 1,958 wallets holding 1,000 BTC to 10,000 BTC and 13,735 wallets holding 100-1,000 BTC.

“Despite Bitcoin’s price ranging between $41K and $44K, there have been major movements in whale wallets this week,” Santiment summarized.

November 2022 marked a pivotal moment as the collapse of FTX exchange shook the crypto market, resulting in Bitcoin reaching lows of $15,600 approximately one month later.