02.05.202219:14 Forex Analysis & Reviews: Bitcoin is on a shaky edge, but shows signs of a reversal

Bitcoin has been falling more than recovering in recent days. Now the main cryptocurrency is on the shaky edge between recovery and a stronger collapse.So now BTCUSD, on the one hand, is bouncing off the support line of the ascending channel, which creates prerequisites for recovery. Also, the downward wedge formed as a result of a long decline gives hope for a reversal. And the strength of the support level at $ 37,500 per coin is a good sign.On the other hand, there remains a shaky fundamental background and the probability of a pessimistic scenario. In this case, there is a risk that bitcoin may fall into the area of $ 28,000 per coin, where there is a strong level of mirror support in 2021.

The probability of deepening the corrective movement

Experienced market analyst Peter Brandt warned that Bitcoin is preparing for a sharp corrective movement.

He explains his forecast by the fact that the main cryptocurrency has broken through the critical diagonal support that kept BTC afloat during the first few months of 2022.Brandt states that if Bitcoin leaves the channel down, then the potential for the decline will be measured by its width, which means there is a potential for a drop to $ 28,000 for bitcoin.

In addition, the veteran trader continues to track the dynamics of the dollar index. He believes that the latter seems ripe for a large-scale breakthrough after trading in a wide range for about six years.

The dynamics of the US dollar index allow us to assess market sentiment and risk appetite. A strong dollar index suggests that investors are selling risky assets, including cryptocurrencies, to secure the dollar.

Why Bitcoin is still the best protection against inflation

Now, when bitcoin remains in a rather precarious position, and investors are waiting for the Fed to raise the rate in response to rising inflation, few people say that the cryptocurrency remains a protective asset. Until a few months ago, this was a popular opinion. But now, when bitcoin is falling, while being prone to correlation with stocks, its protective properties are in question.

However, recently James Mullarney, the host of one of the channels for investors, explained why Bitcoin is the best insurance against inflation.

In his interview with cryptanalyst Benjamin Cowen, he said that average investors turn to crypto assets as salvation from inflation. He argues that traditional assets such as stocks, gold, and real estate are no longer the preferred solution to the inflation protection that fiat currencies have faced.

Meanwhile, wealthier investors avoid banks as a place to store their liquid capital. He noted that instead, the super-rich is looking for the best places to place their money and have already exhausted themselves in real estate and stocks.

The analyst claims that Bitcoin will benefit if it promotes its narrative as an inflationary hedge. He mentioned that historically this narrative did not work because "the price was manipulated a little."

James Mullarney claims that Bitcoin was the only "solid asset on this planet" that he knew about, and thus it could become the best protection against inflation. He predicted that wealthier investors will increasingly move their capital into bitcoin as its hedge history grows.

The fate of Bitcoin and the difference in the thinking of generations

Discussing the prospect of investment assets, it is customary to listen to the opinion of experienced professionals in this field. But things seem to be different with bitcoin.On Saturday, billionaire investor Warren Buffett said at the annual meeting of Berkshire Hathaway shareholders that he was not ready to buy all the bitcoins in the world, even if he was offered to buy them for just $ 25.

The reason for this attitude may be the peculiarity of investors' thinking associated with the era in which they were able to make their fortune. Most likely, 91-year-old Buffett and his partner Charlie Munger, 98, do not belong to the generation that can understand what Bitcoin means for millennials and generation Z.

Investors like Warren Buffett will always struggle to understand the "value" of digital assets because their thinking was formed at a different time.

The value of the cryptocurrency is due to the power of the common infrastructure, zero-disclosure evidence, decentralized consensus mechanisms, apolitical control, and its ability to integrate into the digital future of humanity. The use of paper money is declining as services such as Apple Pay and other contactless payments become more convenient. In the world of web3, cryptocurrency payments are likely to be even more convenient, and paper money will become obsolete in many aspects.

Therefore, is it worth worrying when Buffett is critical of bitcoin? Unlikely.