Cryptos face more volatility; Bitcoin falls below $24,000 again

The last sessions have been marked by volatility. The reigning cryptocurrency does not end up defining a course after the latest events. The minutes of the February meeting of the Federal Reserve (Fed) were tepid, the weekly unemployment once again demonstrated the strength of the US labor market and the GDP of the world's first economy was revised downwards. Experts state there are enough reasons for the Fed to tighten its stance, yet Bitcoin continues to show "remarkable resilience."

"It's not alone in doing so, we're seeing similar in equity markets although to a lesser extent. There's clearly belief returning to crypto markets and some confidence that the darkest days are behind it. If the newsflow can remain onside then that could prove to be the case and a break of $24,500-$25,500 could further fuel that belief," noted Craig Erlam, senior market analyst at Oanda.

For Erlam, this level is "really pivotal" for Bitcoin, and a break of it could generate "plenty more enthusiasm." "And we've all seen what happens when enthusiasm and euphoria exist in cryptos. The price can take off regardless of fundamentals or broader sentiment," Erlam added, while noting that "the 50% recovery so far this year does suggest something may be happening."

With their differences, most experts agree that there is increased risk appetite in the market and that the worst of the bear market is behind us. "People feel that the worst may be over in terms of bad news that we had in the crypto sector last year, and that's why it's (Bitcoin) more resilient," Bradley Duke, co-CEO of ETC Group, stressed to 'CoinDesk'.

Others, however, are of the opinion that the market rally is not sustainable and that it won't be long before we see a downturn in both the equity and cryptocurrency markets. According to Ipek Ozkardeskaya, senior analyst at Swissquote Bank, a softer economic growth could have been encouraging for easing inflation and softening the Fed’s hand. But no, because the GDP price index – another gauge of inflation which was released along with the GDP update, showed that inflation in the Q4 eased but eased much less than expected – as a perfect reflection of the CPI and PPI data released last week, " he explained.

For the expert, "the cocktail of slower-than-expected growth and higher-than-expected inflation is the worst possible outcome, and we could see the latter reflected in the corporate earnings." "The S&P500 companies now all reported their results and earnings fell 1% in the latest quarter. At first glance, this is not a good number, but these earnings are compared to the blockbuster post-pandemic numbers, and despite a fall, they remain high," he noted.

The question is, Ozkardeskaya pointed out, "how far they will fall." "It will depend on several factors, including how aggressive the Fed will continue tightening policy. How aggressive the Fed will continue tightening policy will depend on how sticky inflation is," he added. He also noted that there is one important data point left to end the week: the US PCE index, the Fed’s favourite gauge of inflation.

"Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. If there is not a big surprise, there should be no bloody market reaction to a slightly higher than expected PCE index," he added.

In the cryptocurrency sphere, the SEC continues its regulatory offensive and has filed a formal objection to the acquisition of Voyager by Binance US, the US subsidiary of the world's largest exchange. Meanwhile, Sam Bankman-Fried could face more criminal charges after allegedly hiding and not declaring some donations to politicians.

In the rest of the market, there have been generalized falls in the main tokens. Ripple (XRP), Cardano (ADA), Polygon (MATIC), Solana (SOL) and Polkadot (DOT) fall between 2% and 4%.