3 reasons why Bitcoin price rallied toward $45K entering March

Bitcoin

Bitcoin (BTC) extended its gains, hitting nearly $45 thousand on March 1 as interest rate speculators reduced their bets on aggressive rate hikes in 2022 and the number of whale addresses spiked amid speculations that BTC is proving itself as an apolitical safe-haven.

Traders reduce half-point bets for March

BTC’s price surged more than 4% to reach nearly $45,000, a day after recording its biggest one-day increase since February 2021 as a flurry of sanctions on Russia, including a ban from accessing the global banking system SWIFT, raised concerns over their impact on global growth and inflation.

For instance, swaps tied to the Federal Reserve’s mid-March meeting anticipated a 24.5 basis point (bps) tightening as of March 1, 2022. That indicated a 0.5 bps rate increase — which had a 100% approval from interest rate traders last month — is less likely to happen.

US Forward Swaps – Federal Funds Effective Rate. Source: Bloomberg

Meanwhile, traders also reduced their expectations of the number of rate hikes in 2022 to five from seven just days ago, according to Bloomberg’s Lisa Abramowicz, who shared the following chart.

Implied overnight rate and number of hikes/cuts. Source: Lisa Abramowicz

The repricing of the Fed outlook appeared as investors’ demand for safe-havens, including U.S. Treasuries and gold, boomed in the past few days. 

Bitcoin, which had earlier lost more than half of its value due to fears surrounding aggressive Fed rate hikes, also responded with a sharp recovery due, in part, to reports that Russians were buying the crypto to bypass sanctions.

“Bitcoin saw a significant upward move today as it appears to have slightly regained its safe-haven status while the Russia-Ukraine conflict continues to intensify,” Walid Koudmani, an analyst at XTB Market, told Bloomberg.

Data provided by crypto research firm CoinMetrics also showed a significant spike in the number of addresses holding at least 1,000 BTC, typically considered “whales” by the industry. Their number jumped from 2,127 on Feb. 27, to 2,266 on Feb. 28.

Bitcoin addresses with balance greater than 1K BTC. Source: CoinMetrics, Messari

To 25bps or not to 25bps

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, favored a 25 bps rate hike at the Federal Open Market Committee’s meeting at the end of February. Nonetheless, he also said that a higher than anticipated inflation reading could have him “look at a 50-basis-point move for March.”

Related: 2 key derivatives metrics signal that Bitcoin traders expect BTC to hold $40K

But Ecoinometrics analyst Nick argues that the Russia-Ukraine crisis has now forced the Fed to walk on shaky ground. With inflation likely to remain higher due to higher oil prices, he explained, a too aggressive rate hike in March could risk crashing the stock market.

“Inflation is so high that we can probably afford a stock market dip all the way down to -20%,” he wrote.

“But below that, they’ll have to call back the tightening or risk a multiyear bear market […] Of course that’s not good for Bitcoin.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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