Andrey Zubarev, Senior Researcher of the Department for Digital Finance at the Gaidar Institute, commented on the situation around bitcoin market, focusing on the key macroeconomic factors and internal mechanisms of the crypto-market, which resulted in recent volatility.
The expert noted that the cryptocurrency market as a whole has been under pressure from the global macroeconomic agenda since the beginning of the year. "At the end of January, the US FRS signaled a pause in its interest rate cut cycle, while expectations appeared about the appointment of a more “hawkish” regulator, that is, the former Fed Board member Kevin Warsh. These signals resulted in a decline in risk appetite in global markets, leading to another large-scale “deleveraging” (liquidation of margin positions) in the cryptocurrency market: the price of Bitcoin fell by approximately 30% from the end of January to the first days of February, reaching around $60.000. Thus, the inertial speculative factor in terms of cascading position liquidations can be partly attributed to this decline," said Andrey Zubarev.
Afterwards, almost the entire month of February the market was in a consolidation phase in the $60.000–$70.000 range. The expert emphasized that investor sentiment indicators remained extremely tense: sentiment indicators recorded an elevated level of fear (in May–June 2022), reflecting the uncertainty of market actors.
Commenting on the sharp rise in Bitcoin's price on March 4 (more than 6% in 24 hours, reaching $74.000 at one point), Andrey Zubarev noted that this was a result of a change in the external news environment. Financial markets perceived information about possible diplomatic contacts regarding the escalation in the Middle East with optimism.
"This was a trigger for the crypto market: an upward movement began after a long period of consolidation, which was reinforced by liquidation of short positions on derivatives platforms amounting to almost $500 mn. In this context, even a relatively moderate external impulse can lead to sharp price behavior, as cryptocurrency market remains structurally sensitive to the short squeeze mechanism," the expert concluded.