Bitcoin Breaks Records, Sets Stage for Volatility Amidst Macroeconomic Outlook

Bitcoin (BTC) marked the beginning of Q2 2024 with record weekly, monthly, and quarterly closes. However, old resistance levels, including the 2021 all-time high of $69,000, continue to challenge the bull market. The stage is set for potential volatility as macroeconomic data, including nonfarm payrolls and commentary from Fed Chair Jerome Powell, influences sentiment. Despite Bitcoin's extended stay above $70,000, seasoned hodlers are taking profit, while institutional capital flows into spot ETFs.

Bitcoin: A Historical Quarter End Sets the Stage for Volatility Ahead

As the first quarter of 2024 drew to a close on March 31st, Bitcoin (BTC) achieved several historic milestones. The asset recorded its highest weekly, monthly, and quarterly closing prices ever witnessed. This surge culminated a quarter characterized by sustained momentum and bullish sentiment.

However, the euphoria was met with resistance as Bitcoin encountered hurdles at $69,000, its former all-time high established in 2021. This level has proven to be a significant barrier, preventing the asset from establishing new price peaks.

Analysts attribute the resistance to the lingering presence of sell-side liquidity, particularly among latecomers to the rally. To overcome this impediment, Bitcoin needs to decisively penetrate the $74,000 mark, which would effectively clear out a substantial portion of this liquidity.

As the second quarter of 2024 commences, the stage is set for potential volatility in Bitcoin's price action. Complicating the market outlook is the release of key macroeconomic data from the United States, including the nonfarm payrolls report scheduled for the end of the week.

Federal Reserve Chair Jerome Powell's remarks will also be closely scrutinized. Last week, Bitcoin reacted positively to Powell's indication that interest rate cuts remained on the horizon for 2024.

Amidst Bitcoin's extended rally, seasoned holders have taken advantage of the favorable market conditions to realize profits. This dynamic counters the influx of institutional capital flowing into the asset class via spot exchange-traded funds (ETFs).

Record-Breaking Quarter for Bitcoin

The first quarter of 2024 concluded on a high note for Bitcoin, with the asset securing record-setting weekly, monthly, and quarterly closes at approximately $70,300. This achievement marked a significant milestone in Bitcoin's history.

However, a predictable retracement ensued, with local lows dipping to $68,900 within hours. On shorter timeframes, Bitcoin remains confined within a familiar range, with $69,000 acting as a pivotal focal point.

Cautious Optimism and Resistance

Popular trader Skew advises caution until clearer trend signals emerge. The 4-hour trend remains intact, but the market requires sustained spot buying and perpetual bid momentum to maintain its upward trajectory.

Skew also pinpoints the first Wall Street open as a significant event, as it marks the return of ETF flows. The $69,000 level remains a key resistance point on higher timeframes.

Rekt Capital, a renowned analyst, expresses optimism regarding the recent candle closes. Bitcoin, he argues, has initiated a breakout process and could challenge the upper boundary of its range to establish it as long-term support, paving the way for further upside.

Michaël van de Poppe, founder and CEO of MNTrading, discerns two critical lines in the sand on lower timeframes: $67,000 and $71,700. A clear breakout in either direction is expected to determine the immediate trend, possibly leading to a final test of the previous all-time high before the upcoming halving event.

Macroeconomic Data and Fed Commentary

The upcoming week brings with it a slew of U.S. macroeconomic data releases that will be scrutinized for their potential impact on risk assets, including Bitcoin. Fed Chair Powell's scheduled remarks on April 3rd will be a key highlight.

Risk assets remain optimistic, anticipating a dovish long-term economic policy, with a series of interest rate cuts widely anticipated throughout 2024. Powell's recent comments have reinforced this expectation, indicating that even recent inflationary pressures will not warrant a hawkish stance.

The nonfarm payrolls data, scheduled for release on April 5th, is another highly anticipated event. This release has historically influenced Bitcoin's price volatility.

Analysts believe that a weak jobs report could increase the likelihood of an earlier rate cut, thereby boosting risk assets, including Bitcoin. Conversely, a strong report might subdue risk appetite and exert downward pressure on Bitcoin's price.

Long-Term Holders Cash Out

As Bitcoin scales new heights, long-term holders have been keen to realize profits. On-chain data reveals that a modest trickle of selling has now gained momentum, indicating a shift in sentiment among Bitcoin's "diamond hands."

Glassnode, an analytics firm, reports a resurgence in realized profits, primarily driven by long-term holders. In March, LTHs accounted for nearly half of the $1 billion in realized profits recorded on March 31st.

This trend suggests that LTHs, who are typically more resolute in their conviction to hold Bitcoin, are becoming increasingly active in taking profits. Analysts view this as a factor that could potentially intensify sell-side pressure in the future.

Striking Similarity to 2020

Glassnode also uncovers a remarkable resemblance between Bitcoin's current price action and its previous bull market in 2021. By overlaying the performance of 2024 against that of earlier cycles, the 2011-2013 cycle stands out as an anomaly.

This comparison challenges the notion that institutional participation has introduced a new paradigm in Bitcoin's price behavior. The current market conditions align closely with those of December 2020, when Bitcoin was poised for a major upward surge after retesting its previous all-time highs.

Bullish Divergence in Risk Assets

Crypto market sentiment is increasingly anticipating a favorable price environment across the board, supported by data indicating a rise in risk appetite. The Crypto Fear & Greed Index has surged into "extreme greed" territory, signaling growing irrationality among traders should the bull market continue to deliver gains.

Despite remaining below the levels witnessed during the 2021 all-time highs, the Fear & Greed Index has consistently exceeded those levels, suggesting that traders are receptive to the possibility of further upside.

Santiment, a research firm, attributes the investor optimism to a broader belief in the strength of risk assets. The firm suggests that the recent all-time highs set by the S&P 500 and gold are creating a bullish divergence that could benefit Bitcoin and altcoins, as traders seek to redeploy profits from these other sectors.

Disclaimer: This article does not constitute investment advice. Readers are advised to conduct their own research before making any investment decisions.