Bitcoin’s price is falling back. This week could be a big test.
Bitcoin
and other cryptocurrencies fell on Monday. After an extraordinary period for crypto prices, traders face another week of catalysts that could test the resolve of bulls that have made big gains this year.
The price of Bitcoin has fallen 2% in the past 24 hours to $22,800. Bitcoin is up nearly 40% so far in 2023 – hitting six-month highs above $24,000 in recent trading – amid a rally in digital assets fueled by improved risk sentiment among investors and optimism that the worst of a brutal “crypto winter” is over. While Bitcoin remains around just a third of its late-2021 peak, it is now well above the two-year bear market lows of around $15,500 seen late last year.
Cryptos continue to be correlated to stocks, and move in tandem
Dow Jones Industrial Average
and
S&P 500
as investors react to a complex macro backdrop of inflationary pressures, rising interest rates and looming recession risks. The past week saw cryptos brace against the latest Federal Reserve decision and a flurry of economic data, with the days ahead filled with comments from Fed officials, which could swing sentiment amid shifting expectations for the future of rate hikes.
“Bitcoin has survived a week packed with key events and economic data, while its price has remained around $23,000, but the market may have run out of reasons to buy the coin and may be exposed to profit-making sell orders this week,” said Yuya Hasegawa. an analyst at the crypto exchange Bitbank.
In fact, after such a big rally to start the year, some of the momentum behind a rise in Bitcoin prices may be waning. After rising to $23,000 from $17,000 in a few weeks, prices have since stagnated around that level. While the days ahead hold more catalysts for prices, it remains to be seen whether some traders can try to lock in gains after one of Bitcoin’s best winning streaks in years – and that could challenge bulls’ resolve.
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However, data may suggest otherwise.
“Long-term holders are not yet ready to sell despite the recent rally in price. Derivatives data remains positive with both the long-short ratio and lending rates showing that the bulls are still in control,” said Rachel Lin, CEO of crypto derivatives platform Synfutures.
Indeed, there are indications that the euphoria seen in Bitcoin may actually spread to smaller cryptocurrencies, known as altcoins, in a sign that bullishness is becoming more entrenched and retail investors are pulling back.
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“Altcoins outperformed Bitcoin last week by [Bitcoin Dominance Index] falling for the first time in weeks, showing that the broader crypto market is catching up to Bitcoin’s initial rally and signaling that retail enthusiasm may be returning to altcoins,” Lin said.
Beyond Bitcoin,
Ether
— the second-largest crypto commodity — fell 2% to $1,630. Minor cryptos, or altcoins, were also lower, with
Cardano
fall 2% and
Polygon
misses 4%. Memecoins were also weak, too
Dogecoin
down 4% and
Shiba Inu
drop 5%.
Write to Jack Denton at [email protected]
