Decentral Block Post

On March 23, Bitcoin (BTC) price recovered the $28,000 support after a brief correction below $27,000. The movement closely tracked the traditional financial sector, particularly the tech-heavy Nasdaq Index, which gained 2.1% as Bitcoin surpassed the $28,000 threshold.

On March 22, the Federal Reserve raised its benchmark interest rate by 0.25% but hinted that it is nearing its maximum level for 2023. In the end, however, Fed Chair Jerome Powell stated that it is too soon to determine the extent of the tighter credit conditions, so monetary policy will remain flexible.

Initially, it appears encouraging that the central bank is less inclined to increase the cost of money. However, global economies are exhibiting signs of stress. For instance, consumer confidence in the euro area decreased by 19.2% in March, reversing five consecutive months of gains and defying economists’ predictions of an improvement.

The recession is still putting pressure on companies’ profits and leading to layoffs. For example, on March 23, professional services company Accenture said it would end the contracts of 19,000 workers over the next 18 months. On March 22, the company Indeed, which helps people find jobs, let go of 2,200 workers, or 15% of its staff.

The stronger the correlation to traditional markets, the less likely a decoupling. As a result, according to futures and margin markets, the Bitcoin price increase has not instilled much confidence in professional traders.

MakerDAO, the decentralized autonomous organization (DAO) that governs the DAI stablecoin, has voted overwhelmingly to keep USD Coin (USDC) as the primary collateral for DAI. An alternative proposal to “diversify” collateral into Gemini U.S. Dollar (GUSD) and U.S. Dollar Paxos (USDP) has been rejected in a 20% to 79% vote, according to the proposal’s official page.

In the proposal posted on March 17, the MakerDAO Risk Core Unit suggested that the risk of a cascading bank run in the U.S. has been reduced, thanks to responses from the U.S. federal government. As a result, the risk of using USDC as collateral “has declined significantly since last week and further solvency concerns or depegs are not expected at this time.”

However, it also argued that some risks remain. USDC has “potentially more risky exposure to uninsured bank deposits” and “a weaker legal structure” when compared to its competitors, GUSD and USDP, the proposal stated.

Related: Powell says Fed stumped over the collapse of SVB

The Risk Core Unit offered two options to “normalize” the rules for minting DAI now that the crisis has passed. The first option was to spread minting capacity limits across USDC, GUSD, and USDP. If this option were chosen, the fee for converting USDC to DAI would be reduced from 1% to 0.05% immediately, but would not be reduced all the way to zero until some later date.

The European stock markets fell on March 24 on renewed fears that the banking crisis could rear its ugly head once again. The latest selling was triggered after Deutsche Bank’s credit default swaps, which offer protection to the buyer against specific risks, soared on March 23 without any known catalyst. That pulled down the shares of the German lender by 11%. 

European Central Bank President Christine Lagarde attempted to calm the markets, saying that the euro area baking sector was strong due to the regulatory reforms introduced after the Global Financial Crisis. That could be one of the reasons for the solid recovery in the United States equities markets from the intraday lows.

Although the banking crisis has been positive for Bitcoin’s (BTC) price, the trend may pause if the contagion spreads. During times of panic, traders sell assets to curtail risk. At that time, if Bitcoin does not break below the $25,000 to $20,000 support zone, it will suggest that the bear phase is over.

Could Bitcoin and most major altcoins witness a minor correction? What are the important support levels to keep an eye on? Let’s study the charts of the top-10 cryptocurrencies to find out.

Bitcoin price analysis

Bitcoin formed an inside-day candlestick pattern on March 23, indicating uncertainty among buyers and sellers. The bulls want to extend the up-move but the bears are in no mood to relent. That has kept the price inside a small range.

Bitcoin NFT inscription activity has remained strong with consistency in the daily number of NFTs inscribed on Bitcoin. At the same time, the infrastructure to foster Bitcoin trading is finally coming together with the development of wallets and marketplaces supporting Ordinals.

NFT marketplaces, Gamma and Magic Eden, added support for Bitcoin NFTs this week. While the initial response of traders has been subdued, the activity is expected to pick up soon.

Improving the infrastructure around Bitcoin NFTs

Bitcoin NFTs, also-known-as Ordinals, began with much fanfare in late January as they enhanced the utility and revenue of the Bitcoin blockchain.

Dune dashboard from data analyst dgtl_assets shows that the Ordinals inscription activity remains robust, with nearly 580,000 NFTs inscribed in less than three months.

While the daily inscription activity is vigorous, the trading volume of Bitcoin NFTs is still muted, which can be primarily attributed to the absence of Bitcoin wallets and supporting marketplaces.

Bitcoin (BTC) diced with $28,000 at the March 24 Wall Street open as fresh banking woes failed to provide a further boost to crypto.

Traders stay optimistic on BTC long-term trend

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD losing momentum to hit daily lows of $28,001 on Binance.

The pair was attempting to cement support after a classic comeback the day prior erased panic on the back of the latest United States economic policy moves.

The Federal Reserve hiked baseline interest rates by 0.25% on March 23, this along with mixed comments from Chair Jerome Powell serving to unsettle risk assets amid a lack of clear trajectory.

Related: Fed balance sheet adds $393B in two weeks — Will this send Bitcoin price to $40K?

As of March 22, the Fed's balance sheet surged by nearly $94.5 billion — a $297 billion increase from the last week when the banking crisis started.

New QE hopes boost Bitcoin price

Overall, the U.S. central bank's liabilities increased by $393 billion in the last two weeks to $8.734 trillion. That is closer to the all-time high of $8.95 trillion a year ago when the Fed started its quantitative tightening program and reduced its assets by $600 billion.

The Fed released the data on March 23, coinciding with Bitcoin (BTC) price rallying 5.5% toward $29,000. The rise occurred amid speculations that the Fed's expanding balance sheet results from quantitative easing (QE).

But the Fed did not use new dollar reserves to purchase long-term treasuries. Instead, the central bank dropped its U.S. Treasury holdings by $3.5 billion to $7.937 trillion, suggesting that quantitative tightening is still in place to curb inflation.

On the other hand, Fed's balance sheet grew because it dispatched short-term loans to the ailing banking sector.