Bitcoin price is falling. But that’s a case for $45,000 a month.
Bitcoin
and other cryptocurrencies fell on Tuesday, continuing to pare gains after the latest leg of a rally that has seen digital assets soar higher in 2023. Traders should expect more weakness before a rebound or even a sharp top.
The price of Bitcoin has fallen less than 1% in the past 24 hours to $29,850. The biggest digital asset crossed the critical $30,000 mark last week – psychologically important because that’s where prices stood in June 2022, before the crypto selloff accelerated into a brutal bear market. Bitcoin, up around 80% this year, has failed to consolidate above $30,000, let alone its recent peak near $31,000, and there are signs that some traders are taking profits at these lofty levels.
“Bitcoin’s weakness today is generating downside in our short-term indicators, supporting a deeper pullback in the coming days,” said Katie Stockton, managing partner at technical research group Fairlead Strategies. “Support for Bitcoin is defined by previous resistance, near $25,200. This is a natural place for a pullback to return to… on weakness, we would look for a position for a test of long-term resistance around $35,900.”
Cryptos are likely to remain sensitive to macroeconomic forces in addition to stock market trends and fluctuations in the
Dow Jones Industrial Average
and
S&P 500.
Digital assets have become more closely correlated with stocks over the past year, amid a dramatic increase in interest rates by the Federal Reserve in response to decades of high inflation. Higher interest rates dampen investors’ risk sentiment, knocking down both asset classes.
The rally across cryptos this year has largely come amid expectations that the Fed will soon become more accommodative on monetary policy – a narrative that will continue to shift ahead of the central bank’s next decision on May 3. While corporate earnings have the attention of the stock market this week, there will also be economic data and comments from central bank officials that could move crypto.
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With catalysts ahead, traders should note the short-term weakness described by Fairleads Stockton – but there is also a bullish technical case for prices to rise over the next month. It has to do with the striking similarity between the price dynamics of 2022’s selloff and 2018, when the last Bitcoin bull market turned downward, explained Vetle Lund, an analyst at crypto research group K33.
Both price cycles have the same duration from top to bottom, Lund said, with market bottoms lasting the same length of time and seeing similar recovery trajectories and bear market rallies.
“While no one should expect a one-to-one mirroring of the current move to past moves, the similarity to the 2018 move is staggering,” Lund said. “If history repeats itself, Bitcoin will peak around May 20 at $45,000.”
Beyond Bitcoin,
Ether
rose less than 1% to $2,100. The second-largest crypto recently outperformed following a critical upgrade to the Ethereum blockchain network that makes “staking” — a process that allows token holders to earn interest — easier. Smaller cryptos or altcoins were also up, with both
Cardano
and
Polygon
up less than 1%. Memecoins were weaker, with both
Dogecoin
and
Shiba Inu
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falls less than 1%.
Write to Jack Denton at [email protected]
