Alert: Bitcoin Price Faces Crucial Test Amid Trade War & Record Money Supply

Buckle up, crypto enthusiasts! This week is shaping up to be a rollercoaster for Bitcoin as it grapples with significant macroeconomic headwinds. A brewing trade war and an unprecedented surge in the M2 money supply are creating a perfect storm of uncertainty in the crypto markets. Will Bitcoin weather the storm, or will these pressures push prices down? Let’s dive into the five essential things you need to know about Bitcoin price action this week.

Will Bitcoin Price Break Through Key Resistance Amid Trade War Jitters?

Traders are on high alert, closely monitoring every development in the ongoing trade war. The tension is palpable, and the impact on risk assets, including Bitcoin, is undeniable. Despite closing last week with a 6.7% gain, Bitcoin price is now facing a critical challenge: breaking through a long-standing downtrend resistance line.

Several analysts are weighing in on this pivotal moment:

• Crypto Caesar points to the chart, highlighting the repeated rejections at this key resistance level. A continued breakdown could lead to a potential dip towards the $70K-$72K support zone.
• Bitbull echoes this sentiment, emphasizing the importance of the trendline. A successful breakout confirmation is underway, according to Rekt Capital, but history shows previous false breakouts. A successful retest is crucial.
• AK47 presents both bullish and bearish scenarios. A successful push could propel Bitcoin price towards $88K, but a fakeout could trigger a dip to $81K, potentially setting up for a run towards $95K–$100K later.

The charts are sending mixed signals, and the market analysis suggests traders are holding their breath, waiting for a decisive move.

Trade War Uncertainty: How Tariffs are Rocking Crypto Markets

While the economic calendar is relatively light this week, the elephant in the room is the trade war. All eyes are on potential tariff escalations, particularly concerning China. Any surprise announcements could trigger flash volatility across risk assets, including the already sensitive crypto markets.

A temporary reprieve over the weekend saw Bitcoin briefly surge to eleven-day highs above $86,000 after a pause on tariffs for tech products was announced. However, this optimism was short-lived. The realization that these measures might be temporary quickly dampened spirits, pushing stock futures down and causing Bitcoin price to retreat to around $84,000.

The Kobeissi Letter suggests the temporary tariff exemptions were a strategic move to manage treasury yields, implying the trade war tensions are far from over. The market initially interpreted the pause as a potential end to the trade war, leading to disappointment and increased uncertainty when the temporary nature became clear.

Mosaic Asset further emphasizes the role of bond market volatility in influencing trade policy, suggesting that instability in currencies and Treasury bonds might have prompted a swift policy pivot. The unpredictable nature of tariff announcements has created a binary environment for the stock market – and by extension, crypto markets – where any hint of tension or easing can trigger sharp price swings.

Bitcoin ETF Outflows: A Minor Blip or Cause for Concern?

Last week witnessed significant outflows from US spot Bitcoin ETFs, totaling over $750 million. This marked one of the worst weeks for these investment products since their launch. However, network economist Timothy Peterson offers a different perspective. He argues that these outflows, while substantial in isolation, are insignificant when viewed against the massive investment pool accumulated by ETFs over the past year.

Peterson emphasizes the sheer scale of Bitcoin now, suggesting that even nine-figure drawdowns barely register as a “blip” on the overall chart. He believes these investments are “sticky,” indicating long-term investor confidence despite short-term market fluctuations. In fact, Strategy (formerly MicroStrategy), a known Bitcoin bull, hinted at buying the dip, reinforcing this long-term bullish outlook.

Despite this positive signal from some institutional players, Bank of America survey data reveals a contrasting view. Gold remains the overwhelming favorite as a volatility hedge among respondents (58%), dwarfing Bitcoin’s preference (just 3%). This suggests that while some institutions are doubling down on Bitcoin, broader institutional adoption might still be hesitant amid ongoing economic uncertainties like the trade war.

Dollar Weakness: A Silver Lining for Bitcoin?

Amidst the trade war gloom, there might be a beacon of hope for Bitcoin and other risk assets: the weakening US dollar. The trade war has taken a toll on the greenback, pushing the US Dollar Index (DXY) to three-year lows. Historically, market analysis shows that Bitcoin tends to benefit from dollar weakness, although with a potential lag.

Bitcoindata21 points to a potential repeat of the 2017 pattern, where significant DXY losses preceded Bitcoin’s surge to all-time highs later that year. Another chart highlights a confluence of factors – DXY weakness, Bitcoin, and S&P 500 – suggesting ideal conditions for a long-term bottom in traditional markets and potentially a bullish phase for crypto markets.

The weakening dollar could provide a much-needed tailwind for Bitcoin, offering a counterbalance to the negative pressures from the trade war.

Record M2 Money Supply: Fueling the Next Bitcoin Bull Run?

Looking at the bigger picture, a potentially explosive catalyst for Bitcoin is emerging: the global M2 money supply. It has reached and sustained all-time highs for several consecutive days. Historically, market analysis indicates a positive correlation between global M2 money supply and Bitcoin price action.

Colin Talks Crypto notes this phenomenon as a “fantastic sign,” suggesting it signals a significant influx of capital into risk assets in the coming months. He points to a historical pattern where sharp increases in global M2 money supply are followed by corresponding surges in Bitcoin price, albeit with a latency period of around 108 days.

While a major surge isn’t expected immediately, Colin Talks Crypto suggests a potential “buy the dip” opportunity might arise in the near term before the anticipated M2-driven bull run kicks in, potentially starting in May. This record M2 money supply could be the hidden force that propels Bitcoin to new heights, overriding short-term trade war anxieties.

Conclusion: Navigating the Volatile Week Ahead

This week presents a complex and potentially volatile landscape for Bitcoin. The trade war introduces significant uncertainty, while the record M2 money supply offers a glimmer of long-term bullish hope. Bitcoin price is at a crucial juncture, testing key resistance levels amidst these conflicting forces. Traders must remain vigilant, closely monitoring both macroeconomic developments and on-chain market analysis to navigate the week ahead successfully. The interplay between these factors will likely determine Bitcoin’s trajectory in the short to medium term. Will Bitcoin break free from resistance and ride the wave of global liquidity, or will trade war fears prevail? Only time will tell, but one thing is certain: this week is critical for Bitcoin.

Disclaimer: This article is for informational purposes only and should not be considered investment advice. Crypto investments are highly risky, and you could lose all your investment. Always conduct thorough research before investing.