- After a strong correction over the last month, some market analysts believe that this could be a good time to buy Bitcoin.
- But unlike March 2020, the Fed is not going to support the market with excess liquidity as inflation peaks to a four-decade high.
Since the beginning of Q2 2022, Bitcoin and the broader crypto market have entered a severe correction. The overall crypto market has eroded more than $800 billion correcting 35 percent just in a matter of 45 days.
As this happens, some analysts are finding patterns similar to the March 2020 crash. Comparing the recent downturn to the March crash, some analysts are hopeful that we could possibly see a bounce back in the U.S. equity market as well as crypto.
Popular market trader and Real Vision CEO Raoul Pal said that the current Bitcoin price pattern shows similar traits to that of the March 2020 crash. In his recent episode of the Raoul Pal Adventures in Crypto, Pal said that with the recent downward price action last week, Bitcoin might have “shot straight down” to the bottom on the current wedge formation.
He added that Bitcoin is now in the range which will eventually lead to another price rise. “That was exactly the kind of pattern we had in March 2020,” said Pal.
On March 12, 2020, investors sold Bitcoin in massive quantities amid the fear of the Covid-19 pandemic. Investors were unsure as to what would be the impact of the pandemic on the global economy and the markets. On the other hand, if we see the Bitcoin Fear and Greed Index dropped to the lowest since March 2020.
#Crypto fear & greed index is at 8 out of 100.
The lowest number since the COVID-19 crash in March 2020. pic.twitter.com/jKVTcjrXV1
— Michaël van de Poppe (@CryptoMichNL) May 17, 2022
Will this time be different for Bitcoin?
This time the situation is certainly different considering the global macroeconomic situation and the geopolitical tensions. Back then in March 2020, inflation was under control which gave the Fed the leverage to print excess money.
This time, however, inflation has been soaring to a four-decade high and the Fed has no option but to resolve monetary tightening. As the Fed plans to raise interest rates to control inflation, it will suck more liquidity from the market. Furthermore, during the high inflation period, it is less likely that investors will stick to volatile assets like Bitcoin.
However crypto market enthusiasts continue to back Bitcoin. Popular crypto investor Anthony Pompliano wrote:
Bitcoin is up 340% since March 1, 2020. As central banks around the world devalued their currencies at a historic rate, there is only one asset that stood out from the pack. Bitcoin is the savings technology that shields billions of people from undisciplined monetary policy.
Bitcoin and the broader crypto market have been closely following the U.S. equity markets. Fidelity chief Jurrien Timmer shares his oped based on the past quantitative tightening measures. He expects the market to move sideways largely with occasional drops.
We’ve seen this stock-market pattern before: The chart below shows the 1994, 2015-16, and 2018 Fed tightening cycles. A lot of sideways churn with the occasional sharp drawdown. I continue to think this is a good roadmap. pic.twitter.com/lv68h35807
— Jurrien Timmer (@TimmerFidelity) May 17, 2022
On the other hand, the popular Twitter handles Rekt Capital believes that Bitcoin is entering a period of outsized opportunity. His analysis is based on the Bitcoin log channel and compares it with March 2020.
Last time #BTC lost the Log Channel was in March 2020
This is when $BTC also dipped below the blue 200-SMA
Log Channel clearly shows BTC is entering a period of outsized opportunity
— Rekt Capital (@rektcapital) May 16, 2022