03.03.202217:25 Forex Analysis & Reviews: Bitcoin has become protection against economic shocks for retail investors: how will this affect the cryptocurrency?

Bitcoin has become a safe-haven for the capital of citizens of Ukraine and Russia, after the outbreak of the war of the latter. In an attempt to save their funds, investors of the two countries allowed Bitcoin to make a powerful bullish impulse, the analogs of which have not been observed for more than a year. Subsequently, the asset continued to grow and reached a local maximum of around $ 45k. But there is every reason to believe that as political tensions persist.

Bitcoin has managed to make a significant step forward in terms of global recognition. First of all, the asset was used as an effective alternative to gold. The increased volumes of investments in cryptocurrencies on the territory of Ukraine and Russia are a clear confirmation of this. It is important to highlight here that retail investors, not institutional investors, have become the main audience of BTC. This gives a few facts to think about. First of all, the formed local upward trend is not supported by institutional activity, and therefore, as of March 3, it cannot be considered reliable.

But at the same time, the influx of investments in Bitcoin from individuals leveled the achievements of the three-month correction. In mid-January, the number of "weak hands" and retail investors held no more than 10% of the total turnover. Thanks to this, it was possible to minimize the volatility of the cryptocurrency. Taking into account the influx of "retail refugees", the volatility of BTC and its sensitivity to macroeconomic events will increase significantly.

It is also important to note that, according to lawyer Jake Chervinsky, the trend of increasing bitcoin trading volumes will not continue. The expert attributes this to the lack of necessary infrastructure and disastrous sanctions for the Russian economy. In addition, Chervinsky is sure that the purpose of European and US sanctions is to prohibit any transactions with Russian counterparties. Many cryptocurrency exchanges already prohibit Russian citizens from using bank cards that have been sanctioned. Thus, the excitement of the first days will not turn into a long-term trend of converting all available funds into crypto assets.

The combination of these factors makes it possible to assume that the current investment activity around Bitcoin is not capable of becoming the basis for a protracted bullish trend. I assume that the asset is waiting for a big "purge" as we approach the Fed meeting on March 16. Market makers need to collect liquidity by knocking out "weak hands" prone to panic transactions.

At the same time, the situation around Bitcoin remains fundamentally positive. This is mainly confirmed by the preservation of the downward dynamics in the volume of coins on the exchange. The percentage of "weak hands" also could not reach a critical level, since on February 24, when the Russian Federation invaded the territory of Ukraine, Glassnode analysts did not record panic sales of Bitcoin. With this in mind, we can assume a slight decline in trading activity in mid-March, but this will not fundamentally affect the dynamics of the BTC movement.

In the medium term, there is no reason to believe that Bitcoin will update or approach the absolute maximum. A positive result for the cryptocurrency will be going beyond the range of $32k-$45k, and moving into the area of $46k-$57k. On the charts of the cryptocurrency, the formation of an inverted "head and shoulders" figure with a potential of $54k is already underway. But the pattern has been created by 60%, and therefore it is too early to talk about the real prospect of working it out. In the coming days, the asset will remain within the range of $42.8k-$45.2k.