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| By Marija Matic |
Bitcoin's (BTC, “A”) price action was decidedly volatile over the past week as it marked a low around $64,500 and hit a peak near $73,700.
The surge was fueled by a remarkable net daily inflow of over $1 billion in spot BTC ETFs, a record since their inception.
However, the euphoria was short-lived as Bitcoin experienced a sharp downturn, dropping by 12% during the weekend.
This decline is attributed to profit-taking. However, one notable speculation online suggests that a single hedge fund’s liquidation — necessitating the sale of approximately $1 billion in BTC to cover losses — significantly contributed to the downward trend.
This event, as highlighted by Fred Krueger, underscores the market’s susceptibility to sudden shifts due to movements by large players.
With more institutions now swimming in these waters, it’s a factor that investors will need to be more aware of going forward.
Despite the correction triggering a wave of liquidations, it also led to a cooling off of funding rates. While pullbacks aren’t fun, this does offer a necessary reset for potential upward momentum.
Remember, nothing moves in a straight line, not even in a bull market. And reestablishing support helps build a solid foundation for a future rally.
Presently, Bitcoin has rebounded to trade above $67,000 but remains below the crucial $69,000 level, which is pivotal for sustained price discovery:
Looking ahead, there's anticipation of even more volatility given the macroeconomic landscape.
And, of course, we can’t forget Bitcoin's entry into the pre-halving “danger zone.”
Historically, periods leading up to halving events have witnessed significant price corrections, ranging from 20% to 40% … far greater than the 12% drawdown we just saw last week.
This raises the question of whether the current price action is the prelude to a steeper correction, or if this cycle's pre-halving behavior will manifest in a milder form.
Solana Steals ETH’s Spotlight
As my colleague Beth Canova explained on Friday, Ethereum recently completed its most significant upgrade since the Merge.
But despite having several days for the news to filter into the markets, it’s been overshadowed. And a surprising challenger has emerged in the altcoin arena to grab headlines: Solana (SOL, “B+”).
Solana has seen incredible price action from the earliest days of this bull market. And here are three big factors driving its recent success:
- Meme-Driven Craze: It's undeniable that meme culture plays a role in the crypto world. Memecoins after all are an asset class that can only exist in the crypto realm.
And the "meme frenzy" surrounding Solana has skyrocketed its popularity and attracted new investors, with memecoins such as Bonk (BONK, “C+”) and dogswifhats (WIF, Not Yet Rated) growing to have market capitalizations in the billions.
- Robust Network Usage: Despite Ethereum's recent upgrade that will make its Layer-2 transactions cheaper, Solana boasts the highest 24-hour DEX volume, surpassing both Ethereum and Binance Smart Chain (BSC).
This signifies a higher level of activity on the Solana network, indicating greater user adoption.
- Lucrative DeFi Yields: Those high trading volumes offer a strong incentive for users to participate in Solana’s broader DeFi ecosystem. Liquidity providers on the Solana network can access attractive yields, generating passive income for their crypto holdings.
This surge in activity has propelled SOL's price to soar tenfold since September (from $20 to $200), highlighting its growing prominence in the crypto landscape:
However, a surge in activity brings challenges.
Solana's unprecedented network usage has exposed some vulnerabilities in the last couple of days as platforms like Raydium have encountered performance issues due to overwhelming demand.
This highlights the need for Solana to address scalability concerns to ensure smooth operation as its ecosystem grows.
But despite the challenges, Solana's recent success underscores its growing importance within the broad DeFi landscape.
For the first time ever, Solana's Total Value Locked — also called TVL, this is the total amount of liquidity locked in the Solana network, which includes liquid staking — surpassed that of Binance Chain.
Additionally, Solana now boasts a significantly higher number of active addresses participating in its DeFi ecosystem compared to both Ethereum and BSC.
Solana is here to stay. But how well it continues to perform will depend on how well it can scale to handle its rapidly increasing activity.
Notable News, Notes & Tweets
- The iconic photo of Achi, the dog behind WIF memecoin, was sold as NFT for $4.3 million. Gigantic Rebirth Ventures (GCR) made the winning bid of 1,210.8 ETH.
- Twitter’s founder, Jack Dorsey, launched a new Bitcoin hardware wallet, Bitkey, that promises “Bitcoin ownership that's easy to use and hard to lose”.
- New stablecoin contender, Ethena, hits 1,000,000,000 in USD supply in just three weeks since launch.
What’s Next
The week ahead of us presents a pivotal juncture for both crypto and traditional risk assets. Both are waiting to see if the Federal Reserve will continue fighting inflation or if it’ll raise rates.
With the next Federal Open Market Committee meeting ending on March 20, we should expect volatility for risk assets in the immediate aftermath.
As Bitcoin navigates this critical zone, observers are keen to see if it adheres to historical patterns of sharper pre-halving corrections or exhibits a shallower retracement, signaling potential shifts in market dynamics and investor sentiment.
It’s important to note, however, that after pre-halving correction, Bitcoin typically experiences a few weeks of post-halving re-accumulation before it transitions into a few months of parabolic growth.
So much about the market is in flux. Keeping informed will be your best defense against that volatility. Which is why I suggest you keep up with the latest crypto news and updates right here at Weiss Crypto Daily.
Best,
Marija Matić
